Dividends on Preferred and Common Stock Pecan Theatre Inc. owns and operates mov
ID: 2329720 • Letter: D
Question
Dividends on Preferred and Common Stock
Pecan Theatre Inc. owns and operates movie theaters throughout Florida and Georgia. Pecan Theatre has declared the following annual dividends over a six-year period: Year 1, $32,000; Year 2, $96,000; Year 3, $152,000; Year 4, $184,000; Year 5, $224,000; and Year 6, $280,000. During the entire period ending December 31 of each year, the outstanding stock of the company was composed of 40,000 shares of cumulative, 2% preferred stock, $100 par, and 100,000 shares of common stock, $20 par.
Required:
1. Determine the total dividends and the per-share dividends declared on each class of stock for each of the six years. There were no dividends in arrears at the beginning of Year 1. Summarize the data in tabular form. If required, round your answers to two decimal places. If the amount is zero, please enter "0".
2. Determine the average annual dividend per share for each class of stock for the six-year period. If required, round your answers to two decimal places.
3. Assuming a market price per share of $147 for the preferred stock and $24 for the common stock, determine the average annual percentage return on initial shareholders' investment, based on the average annual dividend per share for preferred stock and for common stock.
Round your answers to two decimal places.
Preferred Dividends Common DividendsYear Total
Dividends
Total
Per Share
Total
Per Share Year 1 $ 32,000 $ $ $ $ Year 2 96,000 Year 3 152,000 Year 4 184,000 Year 5 224,000 Year 6 280,000 $ $
Explanation / Answer
Year
amount of total dividend distributed
amount of preferred dividend = value of preferred stock *2%
preferred dividend per share = total preferred dividend/no of preferred stock
cumulative preferred dividend = total preferred dividend due-total dividend distributed
dividend to common stock = total dividend distributed-dividend to preferred stock
dividend per share = total dividend to common stock/no of common stock
1
32000
80000
2
48000
0
0
2
96000
80000
2
32000
0
0
3
152000
80000
2
112000
40000
0.4
4
184000
80000
2
0
104000
1.04
5
224000
80000
2
0
144000
1.44
6
280000
80000
2
0
200000
2
average dividend per share = average dividend per year/no of share
80000/40000
80000
2
81333.33
81333.33/100000
0.813333333
average annual return = average dividend per share/market price
2/147
1.36%
.8133/24
3.39%
Year
amount of total dividend distributed
amount of preferred dividend = value of preferred stock *2%
preferred dividend per share = total preferred dividend/no of preferred stock
cumulative preferred dividend = total preferred dividend due-total dividend distributed
dividend to common stock = total dividend distributed-dividend to preferred stock
dividend per share = total dividend to common stock/no of common stock
1
32000
80000
2
48000
0
0
2
96000
80000
2
32000
0
0
3
152000
80000
2
112000
40000
0.4
4
184000
80000
2
0
104000
1.04
5
224000
80000
2
0
144000
1.44
6
280000
80000
2
0
200000
2
average dividend per share = average dividend per year/no of share
80000/40000
80000
2
81333.33
81333.33/100000
0.813333333
average annual return = average dividend per share/market price
2/147
1.36%
.8133/24
3.39%