If the Beta company issues $100 million worth of preferred stock,what will happen to its net worth if book value of common equity is $500 million?
A) It will increase by $400 million.
B) It will decrease by $100 million.
C) It will increase to $600 million.
D) It will decrease to $400 million.

Question

Quizplus · Accepted Answer

Issuing $100 million worth of preferred stock will increase the company's net worth by $100 million, raising it from $500 million to $600 million.

If the Beta Company Issues $100 Million Worth of Preferred