Dividends on Preferred and Common Stock Love Theatre Inc. owns and operates movi
ID: 2417187 • Letter: D
Question
Dividends on Preferred and Common Stock Love Theatre Inc. owns and operates movie theaters throughout New Mexico and Utah. Love Theatre has declared the following annual dividends over a six-year period: 2011, $64,000; 2012, $192,000; 2013, $304,000; 2014, $368,000; 2015, $448,000; and 2016, $560,000. During the entire period ending December 31 of each year, the outstanding stock of the company was composed of 40,000 shares of cumulative, 4% preferred stock, $100 par, and 100,000 shares of common stock, $5 par. Required: 1. Calculate 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 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 "0". Preferred Dividends Common Dividends Year Total Dividends Total Per Share Total Per Share 2011 $ 64,000 $ $ $ $ 2012 192,000 2013 304,000 2014 368,000 2015 448,000 2016 560,000 $ $ 2. Calculate 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. Average annual dividend for preferred $ per share Average annual dividend for common $ per share 3. Assuming a market price per share of $345 for the preferred stock and $9 for the common stock, calculate 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 stock % Common stock %
Explanation / Answer
Dividends on Preferred and Common Stock
Love Theatre Inc. owns and operates movie theaters throughout New Mexico and Utah. Love Theatre has declared the following annual dividends over a six-year period:
2011, $64,000;
2012, $192,000;
2013, $304,000;
2014, $368,000;
2015, $448,000; and
2016, $560,000.
During the entire period ending December 31 of each year, the outstanding stock of the company was composed of
40,000 shares of cumulative, 4% preferred stock, $100 par, and
100,000 shares of common stock, $5 par.
Required: 1.
Calculate 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 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 "0".
Preferred Dividends Common Dividends
Year Total Dividends Total Per Share Total Per Share
2011 $64,000 $ $ $ $
2012 192,000
2013 304,000
2014 368,000
2015 448,000
2016 560,000 $ $
2. Calculate 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. Average annual dividend for preferred $ per share Average annual dividend for common $ per share 3. Assuming a market price per share of $345 for the preferred stock and $9 for the common stock, calculate 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 stock % Common stock %
1.
Annual dividend for preferred stock = 40,000 * $100 * 4% = $160,000
Year
Total Dividends
Preferred Dividends
Common Dividends
Total
Per Share
Total
Per Share
2011
$ 64,000.00
$ 64,000.00
$ 1.60
$ 0.00
$ 0.00
2012
$ 192,000.00
$ 192,000.00*
$ 4.80
$ 0.00
$ 0.00
2013
$ 304,000.00
$ 224,000.00**
$ 5.60
$ 80,000.00
$ 0.80
2014
$ 368,000.00
$ 160,000.00
$ 4.00
$ 208,000.00
$ 2.08
2015
$ 448,000.00
$ 160,000.00
$ 4.00
$ 288,000.00
$ 2.88
2016
$ 560,000.00
$ 160,000.00
$ 4.00
$ 400,000.00
$ 4.00
$ 24.00
$ 9.76
* $192,000 = (Arrears dividend of 2011 $96,000) + (Current dividend of 2012 $96000)
** $224,000 = (Arrears dividend of 2012 $64,000) + (Current dividend of 2012 $160,000)
2.
Average annual dividend for preferred: $4.00 per share ($24.00/6)
Average annual dividend for common: $1.63 per share ($9.76/6)
3.
a. Annual return on preferred stock = $4/$345 = 1.16%
b. Annual return on common stock = $1.63/$9 = 18.11%
Year
Total Dividends
Preferred Dividends
Common Dividends
Total
Per Share
Total
Per Share
2011
$ 64,000.00
$ 64,000.00
$ 1.60
$ 0.00
$ 0.00
2012
$ 192,000.00
$ 192,000.00*
$ 4.80
$ 0.00
$ 0.00
2013
$ 304,000.00
$ 224,000.00**
$ 5.60
$ 80,000.00
$ 0.80
2014
$ 368,000.00
$ 160,000.00
$ 4.00
$ 208,000.00
$ 2.08
2015
$ 448,000.00
$ 160,000.00
$ 4.00
$ 288,000.00
$ 2.88
2016
$ 560,000.00
$ 160,000.00
$ 4.00
$ 400,000.00
$ 4.00
$ 24.00
$ 9.76