The equity section of Cyril Corporations balance sheet shows

The equity section of Cyril Corporation\'s balance sheet shows the following Preferred stock-7% cumulative, $20 par value, $25 call price 10,000 shares issued and outstanding Common stock-$10 par value, 30,000 shares issued and outstanding Retained earnings $ 200,000 300,000 267,500 Total stockholders\' equity $ 767,500 Determine the book value per share of the preferred and common stock under two separate situations 1. No preferred dividends are in arrears. ook Value Per Preferred Shar Choose Numerator: Choose Denominator: Book Value Per Preferred Share Book value per pre ferred share ook Value Per Common Shar Choose Numerator: Choose Denominator: Book Value Per Common Share Book value per common share

Solution

NO PREFERRED DIVIDENDS ARE IN ARREARS

BOOK VALUE PER PREFERRED SHARE CALL PRICE VALUE FOR PREFFEREDSHARES OUTSTANDING

=   

NUMBER OF PREFFERED SHARES OUTSTANDING

250000 (25*10000)

=      = $25 PER SHARE

   10000

CORPORATION TOTAL STOCKHOLDERS EQUITY = 767500

(-)PREFERRED STOCK\'S TOTAL BOOK VALUE = (250000)

COMMON STOCK\'S TOTAL BOOK VALUE = 517500

BOOK VALUE PER COMMON SHARE

   = COMMON STOCK\'S TOTAL BOOK VALUE

          

NO. OF SHARES OF COMMON OUTSTANDING

= 517500/30000

   = $17.25

2) THREE YEARS PREFERRED DIVIDENDS ARE IN ARREARS

BOOK VALUE PER PREFERRED SHARE

The book value per share of the preferred stock equals the call price of $25 plus three years of dividends at $4.2(1.4*3) each, or $29.2 ($25 + $4.2 = $29.2).

CORPORATION TOTAL STOCKHOLDERS EQUITY = 767500

(-)PREFERRED STOCK\'S TOTAL BOOK VALUE = (292000) - 29.2*10000

COMMON STOCK\'S TOTAL BOOK VALUE = 475500

BOOK VALUE PER COMMON SHARE = COMMON STOCK\'S TOTAL BOOK VALUE

     

   NO. OF SHARES OF COMMON STOCK OUTSTANDING

   = 475500 / 30000

   = $15.85