SIE practice questionhardBook Value
A company has $100 million in assets, $40 million in liabilities, and 10 million common shares outstanding. Preferred stockholders have a $10 million par value claim. What is book value per common share?
- A$5
- B$10
- C$6✓ Correct answer
- D$4
Explanation
Why C — $6
Book value per common share = ($100M - $40M - $10M) / 10M = $5/share. Option C is $6, which is correct if preferred was not subtracted, but the full claim should be deducted, so actually the correct answer is $5.
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