Ballard Corporation has retained earnings of $200,000. It has 5,000 shares of 6 percent, $100 par value preferred stock outstanding that is callable at 102. The preferred stock is cumulative, and one year of dividends is in arrears. It also has 10,000 shares of $50 par value common stock outstanding. Assume all stock is issued at par. The book value of each share of preferred stock is

Question

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The book value of each share of preferred stock is calculated by adding the par value, the call premium, and the dividends in arrears. The par value is $100, the call premium is 2% of $100, which is $2, and the dividends in arrears are 6% of $100, which is $6. Therefore, the book value is $100 + $2 + $6 = $108.

Ballard Corporation Has Retained Earnings of $200,000