Dividends on A class of stock with preferential rights over common stock.Preferr
ID: 2420212 • Letter: D
Question
Dividends on A class of stock with preferential rights over common stock.Preferred and The stock outstanding when a corporation has issued only one class of stock.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, $30,000; 2012, $90,000; 2013, $143,000; 2014, $165,000; 2015, $218,000; and 2016, $263,000. During the entire period ending December 31 of each year, the The stock in the hands of stockholders.outstanding stock of the company was composed of 25,000 shares of cumulative, 3% preferred stock, $100 The monetary amount printed on a stock certificate.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 Shares of ownership of a corporation.stock for each of the six years. There were no dividends Cumulative preferred stock dividends that have not been paid in prior years are said to be in arrears.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 $138 for the preferred stock and $14 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 DividendsYear Total
Dividends
Total
Per Share
Total
Per Share 2011 $ 30,000 $ $ $ $ 2012 90,000 2013 143,000 2014 165,000 2015 218,000 2016 263,000 $ $
Explanation / Answer
1)
2)
Average annual dividend for preferred = (1.20+3.60+4.20+3+3+3)/6
Average annual dividend for preferred = $ 3 per share
Average annual dividend for common = (0+0+1.52+3.60+5.72 + 7.52)/6
Average annual dividend for common = 3.06
3)
Average annual percentage return - Preferred stock = 3/138
Average annual percentage return - Preferred stock = 2.17%
Average annual percentage return - Common stock= 3.06/14
Average annual percentage return - Common stock = 21.86%
Working
Annual Preferred Dividend = 3%*25000*100 = 75000
In 2011
Total Dividend paid = 30000
Prefered Dividend = 30000
Arrear Prefered stock Dividend = 75000-30000 = 45000
In 2012
Total Dividend paid = 90000
Prefered Dividend = 75000 + 15000 = 90000
Arrear Prefered stock Dividend = 45000-15000 = 30000
In 2013
Total Dividend paid = 143000
Prefered Dividend = 75000 + 30000 = 105000
Common Stock Dividend = 143000 -105000 = 38000
Arrear Prefered stock Dividend = 30000- 30000 = 0
In 2014
Total Dividend paid = 165000
Prefered Dividend = 75000
Common Stock Dividend = 165000-75000 = 90000
In 2015
Total Dividend paid = 218000
Prefered Dividend = 75000
Common Stock Dividend = 218000-75000 = 143000
In 2016
Total Dividend paid = 263000
Prefered Dividend = 75000
Common Stock Dividend = 263000-75000 = 188000
Preferred Dividends Common Dividends Year Total Total Per Share Total Per Share Dividends [a] [b] [c = b/25000] [d] [e = d/100000] 2011 30000 30000 1.20 0 - 2012 90,000 90000 3.60 0 - 2013 143,000 105000 4.20 38,000 1.52 2014 165,000 75000 3.00 90,000 3.60 2015 218,000 75000 3.00 143,000 5.72 2016 263,000 75000 3.00 188,000 7.52