For part E:
If the land adds value to the company, why doesn't the $8MM's worth of land add equity to the company. Even though $8MM was spent on the land, wouldn't the $8MM have added value to the company and therefore its equity?

[NEAS: See the previous postings. If the firm spends cash and acquires land, book equity doesn't change.]

To calculate the book equity on part E, it says to use "original cash + earning - expense", which I interpret as = original cash + retained earning. (please correct me if that's wrong) 

My question: what counts as "original cash?"

 -  Is it the sale of outstanding stock price throughtout the year? i.e. ($12.5*2M) + ($17.5*1M) ?

 -  also want to confirm that orig. cash does not include the $8M used to buy land, since that amount is being canceled out (expenditure out first but gain back in asset)

Your help is greatly appreciated!

Why is the 1 million authorized stock(4-2-1=1) left excluded from the following book equity formula? 

"E) Book equity = $3M + $39.5M +($6M - $5M) = $43.5M"

D. A company's retained earnings are mathematically defined as follows:                             

Prior Retained Earnings+Net Income-Dividends.  (Net Income=Revenues-Expenses)              

Hence, in this problem, Retained Earnings = Prior Retained Earnings+Revenues-Expenses-Dividends = 0+6M-5M-0 = $1M

E. Book Equity = Issued Shares*Sale Price + Retained Earnings = 2M*$12.50 + 1M*$17.50 + $1M = $43.5M

F. Market Equity = Outstanding Shares*Current Market Price = 3M*$17.50 = $52.5M