Question:
Raphael Corporation’s common stock is currently selling on a stock exchange at \(85 per share, and its current balance sheet shows the following stockholders’ equity section:
Preferred stock—5% cumulative, \)___ par value, 1,000 shares
authorized, issued, and outstanding . . .. . . . . . . . . . . . . . . . . . . . . . . . . . . . \( 50,000
Common stock—\)___ par value, 4,000 shares authorized, issued,
and outstanding . . . . . . . . . . . . . . . . . . .. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 80,000
Retained earnings . . . . . . . . . . . . . . . . .. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 150,000
Total stockholders’ equity . . . . . . . . .. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . \(280,000
Required
Required
1. What is the current market value (price) of this corporation’s common stock?
2. What are the par values of the corporation’s preferred stock and its common stock?
3. If no dividends are in arrears, what is the book value per share of common stock? (Round per share value to the nearest cent.)
4. If two years’ preferred dividends are in arrears, what is the book value per share of common stock? (Round per share value to the nearest cent.)
5. If two years’ preferred dividends are in arrears and the board of directors declares cash dividends of \)11,500, what total amount will be paid to the preferred and to the common shareholders?
What is the amount of dividends per share for the common stock? (Round per share value to the nearest cent.)
Analysis Component
6. What are some factors that can contribute to a difference between the book value of common stock and its market value (price)?
