Question

Raphael Corporation’s common stock is currently selling on a stock exchange at $181 per share, and its current balance sheet shows the following stockholders’ equity section:

Preferred stock—5% cumulative, $___ par value, 1,000 shares authorized, issued, and outstanding	$	75,000
Common stock—$___ par value, 4,000 shares authorized, issued, and outstanding		140,000
Retained earnings		350,000
Total stockholders' equity	$	565,000

Required:
1. What is the current market value (price) of this corporation’s common stock?

Raphael Corporation’s common stock is currently selling on a stock exchange at $181 per share, and its current balance sheet shows the following stockholders’ equity section:

Preferred stock—5% cumulative, $___ par value, 1,000 shares authorized, issued, and outstanding	$	75,000
Common stock—$___ par value, 4,000 shares authorized, issued, and outstanding		140,000
Retained earnings		350,000
Total stockholders' equity	$	565,000

2. What are the par values of the corporation’s preferred stock and its common stock?
corporations preferred stock

Corporation's common stock

Raphael Corporation’s common stock is currently selling on a stock exchange at $181 per share, and its current balance sheet shows the following stockholders’ equity section:

Preferred stock—5% cumulative, $___ par value, 1,000 shares authorized, issued, and outstanding	$	75,000
Common stock—$___ par value, 4,000 shares authorized, issued, and outstanding		140,000
Retained earnings		350,000
Total stockholders' equity	$	565,000

3. If no dividends are in arrears, what is the book value per share of common stock?

Raphael Corporation’s common stock is currently selling on a stock exchange at $181 per share, and its current balance sheet shows the following stockholders’ equity section:

Preferred stock—5% cumulative, $___ par value, 1,000 shares authorized, issued, and outstanding	$	75,000
Common stock—$___ par value, 4,000 shares authorized, issued, and outstanding		140,000
Retained earnings		350,000
Total stockholders' equity	$	565,000

4. If two years’ preferred dividends are in arrears, what is the book value per share of common stock?

Raphael Corporation’s common stock is currently selling on a stock exchange at $181 per share, and its current balance sheet shows the following stockholders’ equity section:

Preferred stock—5% cumulative, $___ par value, 1,000 shares authorized, issued, and outstanding	$	75,000
Common stock—$___ par value, 4,000 shares authorized, issued, and outstanding		140,000
Retained earnings		350,000
Total stockholders' equity	$	565,000

5.1 If two years’ preferred dividends are in arrears and the board of directors declares cash dividends of $15,250, what total amount will be paid to the preferred and to the common shareholders?

5.2 What is the amount of dividends per share for the common stock? (Round your answer to two decimal places.)

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Answer 1

Solution 1:

Current market value (price) of this corporation’s common stock = $ 181 per share

Current market value (Total) = $181* common shares outstanding = $181 * 4000 = $724,000

Solution 2:

Par Value of Corporation's Common preferred stock = $75000 / 1000 shares = $75

Par Value of corporations Common stock = $140000 / 4000 shares = $35

Solution 3:

Book value per share of common stock = (Common Stock +retained earning) / number of common shares

= ($140000+ $350000) / 4000 = $122.50

Solution 4:

Preferred dividend arrears for 2 years = $75000*5% * 2 = $7500

Book value per share for common shares = (140000 + 350000 -7500) / 4000 = $ 120.625 per share

Solution 5.1:

Preferred dividend= 2 years arrears dividend + Current year dividend = $75000*5%*3 = $11,250

Common stock dividend = $15250 - $11250 = $4,000

Solution 5.2:

Common stock dividend per share = $4000 / 4000 = $1 per share