Price to Book Value 333. Since preferred stockholders have a higher claim on assets and earnings than common shareholders. If return on equity equals the cost of equity capital then residual income is zero and the valuation is equal to book value.
Book Value per Share Total Common Stockholders Equity Preferred Stock Number of Common Shares.
Book Value per share Rs 30 per share. Residual income is established in the formula by taking return on equity less cost of equity capital and then multiplying it by book value. Next determine the rate at which coupon payments will be paid and using that calculate the periodic coupon payments. Price to Book Value 333.