Dividends on Preferred and Common Stock Love Theatre Inc. owns and operates movi

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, $10 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".

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.

3. Assuming a market price per share of $206 for the preferred stock and $15 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 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 $ $

Explanation / Answer

Note: Amounts are in $

1 Preferred Dividends Common Dividends Year Total Dividends Total Per Share Total Per Share 2011 64000 64000 1.6 0 0 2012 192000 160000 4 32000 0.32 2013 304000 160000 4 144000 1.44 2014 368000 160000 4 208000 2.08 2015 448000 160000 4 288000 2.88 2016 560000 160000 4 400000 4 In the first instance, all dividend paid to preferred stock, because if dividend is not sufficient to pay to common and preferred stockhloder, then all dividend is paid to firtst preferred stock holder and then balance remained, if any, will be paid to Common Stockholder. 2 Average annual dividend per share Preferred Stock = Sum of dividend/ No. of years = (1.6+4+4+4+4+4)/6 = 3.6 Common Stock = Sum of dividend/ No. of years = (0+.32+1.44+2.08+2.88+4)/6 = 1.8

Related Questions

Navigate

• Browse (All)
• Browse D
• Subjects

---