Pike Corporation has total stockholders' equity of $8,690,000 as of December 31, 2017. The company has 300,000 shares of $2 par value common stock and 20,000 shares of 8% cumulative preferred stock, $100 par value, outstanding. Due to lower-than-expected net income, no dividends were declared by Pike's board of directors for 2017. The book value per share of common stock is:

a $25.00

b $21.77.

c. $23.00

d $25.60.

Question

Business

Jorden Brooks

23 December, 07:37

Pike Corporation has total stockholders' equity of $8,690,000 as of December 31, 2017. The company has 300,000 shares of $2 par value common stock and 20,000 shares of 8% cumulative preferred stock, $100 par value, outstanding. Due to lower-than-expected net income, no dividends were declared by Pike's board of directors for 2017. The book value per share of common stock is:

a $25.00

b $21.77.

c. $23.00

d $25.60.

+4

Answers (1)

Know the Answer?

Kaliyah Miller · Answer 1

Option B is correct.

$21.77

Explanation:

Equity available to common Stockholders = Total Stockholders' Equity - Preferred Stock value - Arrears of dividend to Preferred Stockholders

= $8,690,000 - (20,000*$100) - (20,000*$8) = $6,530,000

Book Value per share of Common stock = Equity available to common Stockholders / Outstanding shares of Common stock

Book Value per share of common stock = $6,530,000 / 300000 = $21.77