At December 31, Gorden Limited has total equity of £3,200,000. Included in this total are share capital-preference £500,000 and share premium-preference £50,000. There are 10,000 shares of £50 par value, 8% cumulative preference shares outstanding. At year-end, 200,000 ordinary shares are outstanding.
Instructions
Compute the book value per share of ordinary shares, under each of the following assumptions.
(a) There are no preference dividends in arrears, and the preference shares do not have a call price.
(b) Preference dividends are one year in arrears, and the preference shares have a call price of £60 per share.