For HW 13.1 part (E) and part (F).
For part (E), what do they mean by original cash ?
For part (F), the equity should be $12.5 x 2M shares + $17.5 x 1M shares =$32.5 M or is it $17.5 x 3M shares = $52.5 M ?

e) not sure, but I have $43.5M ($3M common stock+ $1M net earning+$39.5M surplus)
f) $52.5M

d) I had to assume nothing is distributed as dividend.

A) 3million shares outstanding

B) I think I'm supposed to use shares outstanding?  so we get 3million * $1.00

C) Is this just for the additional shares sold in 20X7?  (1 million * $17.50) - (1million * $1.00)

D) ????

E) What's the original cash?  Earnings = 6 million, renovations = 5 million for the formula they suggested Original cash + earnings - renovation expenses

F) does number of shares mean total number of shares or shares outstanding so we get 3 million * 17.50?

A) correct

B) correct

C) additional paid-in capital = 2M @ $12.5 + 1M @ $17.5 - 3M = $39.5M

D) Like I said in my previous post, it did not specify what payout ratio (plowback ratio) is, so I just assumed that the company like to expand it's business in the near future.  In order to do that, the company retained 100% of it's earning for this purpose.

Then retained earning = $6M

Retained earning on book = $6M - $5M =$1M

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

F) Market equity = 3M @ $17.5 = $52.5M

Here is what I have:

c) 12.5(2mil)-1(1mil)+17.5(1mil)-1(1mil) = 39.5 mil

d) 6mil - 5 mil = 1mil

e) 3mil + 39.5 mil + 1 mil = 43.5 mil

f) I agree with you, 17.5(3mil) = 52.5mil

For part d, do you not have to take into consideration the $8M used to purchase the land?

I believe the land asset counts towards the book equity with the same value that you purchased it at, so it cancels out. You lose $8m in cash, but gain $8m in land (which doesn't depreciate--that's the key part of the question).

By contrast, the renovation doesn't result in a physical "renovation" asset that the company can say it holds... Therefore the $5m cost for that is subtracted from book equity without being replaced by anything.

That's how I see it, anyway.

in e) 1 mill share is sold to get additional paid-in capital so I think we will make a mistake if we add it in book equity.

So my answer is:
cash in : 12.5x2 + 6 + 17.5
cash out: 5 +1
equity : 42.5

part D) The definition of retained earnings is: earnings (from sale of stocks) that are not distributed as dividend. I do not see how this question make sense. If none of the cash is used in dividends, then retained earnings are 2 mill*12.50 + 1 mill*17.5 = $42.5 mill regardless of what it was used for as investment.

Retained earnings do not include sale of stocks. That would be capital. Retained earnings would be accumulated income. In this case, eacrnings  = 6 mil. Expenses = 5 mil, Therefore, retained earnings = 1 mil.