Birds and More Is Considering a Project Which Requires the Purchase

question 8

Multiple Choice

Birds and More is considering a project which requires the purchase of $175,000 of fixed assets.The net present value of the project is $4,500.Equity shares will be issued as the sole means of financing this project.The price-earnings ratio of the project equals that of the existing firm.What will the new market value per share be after the project is implemented given the following current information on the firm? $$\begin{array} { l r } \text { Number of shares outstanding } & 24,000 \\\text { Book value } & \$ 320,000 \\\text { Market value } & \$ 457,600 \\\text { Net income } & \$ 18,000\end{array}$$

• A)$18.68
• B)$18.72
• C)$18.80
• D)$19.20
• E)$21.10

---

Definitions:

Direct Labor-Hours

A measure of the total hours worked directly on a specific product or service by employees.

Predetermined Overhead Rate

An estimated rate used to apply manufacturing overhead to products or job orders, calculated before the period begins based on expected costs and activity levels.

Machine-Hours

A measurement of the amount of time machines are operated during the production process.

Direct Labor-Hours

The total hours worked directly on the production of goods, used as a basis for allocating labor costs to products.