Dividends Per Share Fairmount Inc., a developer of radiology equipment, has stoc
ID: 2415145 • Letter: D
Question
Dividends Per Share
Fairmount Inc., a developer of radiology equipment, has stock outstanding as follows: 21,000 shares of cumulative preferred 3% stock, $140 par, and 70,000 shares of $15 par common. During its first four years of operations, the following amounts were distributed as dividends: first year, $59,010; second year, $82,110; third year, $159,880; fourth year, $189,700.
Calculate the dividends per share on each class of stock for each of the four years. Round all answers to two decimal places. If no dividends are paid in a given year, enter "0".
1st Year 2nd Year 3rd Year 4th Year Preferred stock (dividend per share) $ $ $ $ Common stock (dividend per share) $ $ $ $Explanation / Answer
Note 1 - First Year
Total Dividend = $ 59,010
Firstly dividend will be paid on prefered stock
Dividend paid to prefered stock = 140 * 3 % = 4.2 per share
Total Dividend = 4.2 * 21,000 = 88,200 restricted to 59,010
So dividend paid to equity shareholder = Nil
Note 2 - Second Year
Total Dividend = $ 82,110
Firstly dividend will be paid on prefered stock
Dividend paid to prefered stock = 140 * 3 % = 4.2 per share
Total Dividend = 4.2 * 21,000 = 88,200 restricted to 82,110
So dividend paid to equity shareholder = Nil
Note 3 - Third Year
Total Dividend = $ 159,880
Firstly dividend will be paid on prefered stock
Dividend paid to prefered stock = 140 * 3 % = 4.2 per share
Total Dividend = 4.2 * 21,000 = 88,200
So dividend paid to equity shareholder = 159,880 - 88,200 = $ 71,680
Note 4 - Fourth Year
Total Dividend = $ 189,700
Firstly dividend will be paid on prefered stock
Dividend paid to prefered stock = 140 * 3 % = 4.2 per share
Total Dividend = 4.2 * 21,000 = 88,200
So dividend paid to equity shareholder = 189,700 - 88,200 = 101,500
Particulars 1 Year (Note 1) 2 Year (Note 2) 3 Year (Note 3) 4 Year (Note 4) Prefered Stock ( dividend per share ) 59,010/ 21,000= $2.81 82,110/21,000= $3.91 88,200/21,000 = $ 4.2 88,200/21,000 = $ 4.2 Common Stock ( dividend per share ) 0 0 71,680/70,000 = $1.02 101,500/70,000 = $ 1.45