9.

14.

Market versus Book Values. The founder of Alchemy Products Inc. discovered a way to turn gold into lead and patented this new technology. He then formed a corporation and invested $200,000 in setting up a production plant. He believes that he could sell his patent for $50 million. ( LO32 ) a. What is the book value of the firm? b. What is the market value of the firm? c. If there are two million shares of stock in the new corporation, what is the book value per share? d. What is the price per share? 14. Income versus Cash Flow. Butterfly Tractors had $14 million in sales last year. Cost of goods sold was $8 million, depreciation expense was \$2 million, interest payment on outstanding debt was $1 million, and the firm's tax rate was 21%. ( LO3-3) a. What was the firm's net income? b. What was the firm's cash flow? c. What would happen to net income and cash flow if depreciation were increased by $1 million? d. Would you expect the change in depreciation to have a positive or negative impact on the firm's stock price? e. What would be the impact on net income if depreciation was $1 million and interest expense was $2 million? f. What would be the impact on cash flow if depreciation was $1 million and interest expense was $2 million