Hey Chegg, I tried to solve this problem on my own, but I am not sure if I am correct. I have shown my work. Let me know if I am right or wrong. If I am wrong, guide me and tell what my mistakes were. It would help me a lot.

The value of book equity is $100 million. The debt is $40 million. Analysts believe that if the firm needed to sell its assets quickly, it would lose 65% of their value. Also, they estimate that the increase in the price of assets is about 25% more than the book value. If the firm has 1 million shares, how much are the liquidation value, book value, and replacement value per share?

Following the information that is provided above, the book value of equity is $100 million and debt is $40 million. The first step is to calculate the value of assets. This can be achieved by using the accounting equation, which is shown below:

Accounting Equation:

Assets = Liabilities + Shareholders Equity

$140 million = $40 million + $100 million

The value of assets amounts to $140 million. Now, the second step is that the book value per share needs to be computed:

Book Value Per Share (BVPS) = Equity / Number of Shares

Book Value Per Share (BVPS) = $100 million / 1 million

Book Value Per Share (BVPS) = $100 per share

The third step is to use the formula shown below to figure out the liquidation value per share, which is the total worth of a companys physical assets when or if it goes out of business.

Liquidation Value Per Share (LVPS) = [Sell Off Price of Assets (Debt / Number of Shares)]

Liquidation Value Per Share (LVPS) = [($140 million * 65%) ($40 million / 1 million)]

Liquidation Value Per Share (LVPS) = [($140 million * .65) ($40 million / 1 million)]

Liquidation Value Per Share (LVPS) = $91 - $40

Liquidation Value Per Share (LVPS) = $51 per share, which represents the lowest price that one will receive if the company liquidates its assets

The fourth step involves calculating the replacement cost per share, which answers the question: How much money does one need to pay to replace the assets?

Replacement Cost Per Share (RCPS) = Replacement Cost Debt / Number of Shares

Replacement Cost Per Share (RCPS) = [($140 million * 1 + 25%) $40 million / 1 million

Replacement Cost Per Share (RCPS) = [($140 million * 1 + .25) $40 million / 1 million

Replacement Cost Per Share (RCPS) = [($140 million * 1.25) $40 million / 1 million

Replacement Cost Per Share (RCPS) = $175 $40

Replacement Cost Per Share (RCPS) = $135 per share