MoneyCo had sales revenue and net income during the current year of \$500,000 and \$60,000, respectively. The total amount of stockholders' equity was \$600,000, and common shares outstanding were 120,000 all year. If the market price of the stock is \$10, what is the book value per share of common stock?

• A. \$0.20
• B. \$0.50
• C. \$4.17
• D. \$5.00

Answer: (D)

Verified step by step guidance

1. Identify the formula for calculating the book value per share of common stock, which is: \( \text{Book Value per Share} = \frac{\text{Total Stockholders' Equity}}{\text{Number of Common Shares Outstanding}} \).
2. Substitute the given values into the formula. Here, the total stockholders' equity is \$600,000, and the number of common shares outstanding is 120,000.
3. Perform the division: divide the total stockholders' equity (\$600,000) by the number of common shares outstanding (120,000) to find the book value per share.
4. Interpret the result: the book value per share represents the amount of equity each share would receive if the company were liquidated at the values on the balance sheet.
5. Compare the calculated book value per share with the provided options to determine the correct answer.