Question

A company has 500 shares of $50 par value preferred stock outstanding,and the call price of its preferred stock is $60 per share.It also has 20,000 shares of common stock outstanding,and the total value of its stockholders' equity is $680,000.The company's book value per common share equals:_________.
A. $31.71.
B. $32.50.
C. $32.75.
D. $33.17.
E. $60.00

Answer 1

Answer:

B $32.50

Explanation:

Book value per common share will be calculated as;

= (Stockholder's equity - Shares × Call price per share) / Shares of common stock outstanding

Given that;

Stockholder's equity = $680,000

Shares = 500

Call price per share = $60

Shares of common stock outstanding = 20,000

Therefore,

Book value per common share

= ($680,000 - 500 × $60) / 20,000

= ($680,000 - $30,000) / 20,000

= $650,000 / 20,000

= $32.5