Maharaja Corp was incorporated on January 1 2012 Maharaja is

Maharaja Corp. was incorporated on January 1, 2012. Maharaja issued 4,000 shares of common stock and 500 shares of preferred stock on that date. The preferred shares are cumulative, $100 par, with an 8% dividend rate. Maharaja has not paid any dividends yet. In 2015, Maharaja had its first profitable year, and on November 1, 2015, Maharaja declared a total dividend of $28,000. The total amount that will be paid out to preferred shareholders is: A) $4,000 B) $16,000 C) $3,200 D) $28,000

Solution

annual dividends per preferred share= 100*0.08 = $ 8 (per share)

company pays (8*500= ) $ 4000 in preferred dividends each year. so, In 3 year it will pay = 4000*3 = $12000 .

total amount that will be paid out to preferred shareholders = 28000- 12000= $16000