Dividends on Preferred and Common Stock Pecan Theatre Inc. owns and operates mov
ID: 2527457 • Letter: D
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, $40,000; Year 2, $80,000; Year 3, $180,000; Year 4, $220,000; Year 5, $290,000; and Year 6, $360,000. During the entire period ended December 31 of each year, the outstanding stock of the company was composed of 25,000 shares of cumulative preferred 4% stock, $100 par, and 100,000 shares of common stock, $15 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. If required, round your answers to two decimal places. If the amount is zero, please enter "0".
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.
3. Assuming a market price per share of $205 for the preferred stock and $20 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.
Round your answers to two decimal places.
Preferred Dividends Common DividendsYear Total
Dividends
Total
Per Share
Total
Per Share Year 1 $ 40,000 $ $ $ $ Year 2 80,000 Year 3 180,000 Year 4 220,000 Year 5 290,000 Year 6 360,000 $ $
Explanation / Answer
Preferrence Shares Common Dividend Year Total Dividend Total Per Share Total Per Share 1 40000 40000 1.6 0 0 2 80000 80000 3.2 0 0 3 180000 180000 7.2 0 0 4 220000 100000 4 120000 1.2 5 290000 100000 4 190000 1.9 6 360000 100000 4 260000 2.6 24 5.7 Preference Shares =100*4% = 4 per share No of Preference Shares = 25000 Working for preference shares Year Dividend Paid Balance 1 100000 40000 60000 2 100000 80000 80000 3 100000 180000 0 4 100000 100000 0 5 100000 100000 0 6 100000 100000 0 2 Average Annual Dividend of Preference shares = 24/6 = 4 Average Annual Dividend of Common shares = 5.7 / 6 = 0.95 3 Average Annual % of Preference shares = 4/205*100 = 1.95% 1.95122 Average Annual % of Common shares = 0.95/20*100 = 4.75%