Book Value Discount Formula

Book value per share book value of equity total shares outstanding.

Book value discount formula. Book value per share rs 30 per share. Calculate the cash flows for the asset and timeline that is in which year they will follow. We used the average number of shares outstanding because the closing period amount may skew results if there was a stock issuance or major stock buyouts.

Price to book value is calculated as. Book value may also be. Discount rate is calculated using the formula given below discount rate t future cash flow present value 1 t n 1 discount rate 2 10 000 7 600 1 2 4 1 discount rate 6 98.

Price to book value 3 33. Taking assumed values for the following. The formula for calculating book value per share is the total common stockholders equity less the preferred stock divided by the number of common shares of the company.

Price to book value market price per share book value per share. Note that the book value of the asset can never dip below the salvage value even if the calculated expense that year is large enough to put it below this value. In the example above the asset s book value after 6 years would be 10 000 6000 or 4000.

How to calculate book value. Calculate the discount factors for the respective years using the formula. The formula for calculating the book value per share is given as follows.

Multiply the result obtained in step 1 by step 2. To arrive at the book value simply subtract the depreciation to date from the cost. The 1 st part will be to find out the equity which is available to its common shareholders.