Dividends on Preferred and Common Stock Pecan Theatre Inc. owns and operates mov

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, $64,000; Year 3, $144,000; Year 4, $156,000; Year 5, $166,000; and Year 6, $182,000 During the entire period ended December 31 of each year, the outstanding stock of the company was composed of 40,000 shares of cumulative preferred 290 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 Note: If required, round your answers to two decimal places. If the amount is zero, enter "O" Preferred Dividends Common Dividends Total Dividends 32,000 64,000 144,000 156,000 166,000 182,000 Total Per Share Total Per Share Year Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 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 Average annual dividend for preferred Average annual dividend for commorn per share per share 3. Assuming a market price per share of $130 for the preferred stock and $12 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. Use the rounded amounts from part 2 in future computations. And round your final answers to two decimal places Preferred stock Common stock

Explanation / Answer

Solution 1:

Solution 2:

Average annual dividend for preferred = $480,000 / (6 *40000) = $2 per share

Average annual dividend for common = $264,000 / (6*100000) = $0.44 per share

Solution 3:

Average annual percentage return on preferred stock = Average dividend / Market price per share = $2 / $130 = 1.54%

Average annual percentage return on common stock = $0.44 / $12 = 3.67%

Determination of total dividends and per share dividends declared on each class of stocks and average annual dividends - Pecan Theater Inc. Year Total Dividends Preferred Dividends Common Dividends Total Total Dividends in Arrear Per Share Total Per Share Year 1 $32,000.00 $32,000.00 $48,000.00 $0.80 $0.00 $0.00 Year 2 $64,000.00 $64,000.00 $64,000.00 $1.60 $0.00 $0.00 Year 3 $144,000.00 $144,000.00 $0.00 $3.60 $0.00 $0.00 Year 4 $156,000.00 $80,000.00 $0.00 $2.00 $76,000.00 $0.76 Year 5 $166,000.00 $80,000.00 $0.00 $2.00 $86,000.00 $0.86 Year 6 $182,000.00 $80,000.00 $0.00 $2.00 $102,000.00 $1.02 Total $480,000.00 $2.00 $264,000.00 $0.44

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