eBook Show Me How Calculator vidends on Preferred and Common

eBook Show Me How Calculator vidends on Preferred and Common Stock Love Theatre Inc. owns and operates movie theaters throughout New Mexico and Utah. Love Theatre has dedared the following annual dividends over a six- year period: 2011, $48,000; 2012, $144,000; 2013, $216,000; 2014, $264,000; 2015, $336,000; and 2016, $420,000. During the entire period ending December 31 of each year, the outstanding stock of the company was composed of 40,000 shares of curn dative 3% pro erred stock ti o a, and 10 shares of common stock, $25 par. uired 1. Calculate the total dividends and the per-share dividends dedared on each class of stock for each of the six years. There were no dividends in arrears on January 1, 2011. Summarize the data in tabular form. If required, round your answers to two decimal places. If the amount is zero, please enter \"o. Preferred Dividends Common Dividends Total Dividends 48,000 144,000 216,000 264,000 336,000 420,000 Per Share Total Per Share Year 2011 2012 2013 2014 2015 2016 Total 2. Calculate the average annual dividend per share for each class of stock for the six-year perlod. If required, round your answers to two decimal places ched Hy Work5 more Check My Work uses remaining PreviousNext

Solution

1)In case of cummulative preferred shares , if preferred dividend gets short due to insufficient income ,the dividend in arrear(not paid) carried to next year/years and preferential right over common stockholders (that preferred dividend will be paid first (current +arrear) ]

Preferred dividend =par value* %

               = (40000*100)*.03

                = 120000

2)

Average annual dividend for preferred =Total per unit preferred dividend /number of years

= [1.2+3.6+4.2+3+3+3]/6

=18 /6

= $ 3 per share

Average common dividend =[0+0+.48+1.44+2.16+3]/6

          = 7.08/6

            = $ 1.18 per share

3)Rate of return for preferred stock = [market price+ average dividend- purchase price]/purchase price

          =[165+3-100]/100

          = 68 /100

            = .68 or 68%

Rate of return for common stock =[30+1.18-25]/25

           = .2472 or 24.72%

		Preferred dividend	common dividend	preferred dividend in arrear
Year	Total dividend	Total	per share	Total	per share
2011	48000	48000	48000/40000 = $ 1.2	0	0	120000-48000= 72000
2012	144000	144000	144000/40000= $ 3.6	0	0	120000current+72000arrear -144000 =48000
2013	216000	168000   [120000+48000]	168000/40000=$ 4.2	216000-168000= 48000	48000/100000=$.48	0
2014	264000	120000	120000/40000=$3	264000-120000=144000	144000/100000=$1.44
2015	336000	120000	3	336000-120000=216000	216000/100000=$2.16
2016	420000	120000	3	420000-120000=300000	300000/100000=3