Dividends on Preferred and Common Stock Pecan Theatre Inc. owns and operates mov
ID: 2536722 • 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, $36,000; Year 2, $72,000; Year 3, $171,000; Year 4, $207,000; Year 5, $261,000; and Year 6, $324,000. During the entire period ended December 31 of each year, the outstanding stock of the company was composed of 30,000 shares of cumulative preferred 396 stock, $100 par, and 100,000 shares of common stock, $5 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". Preferred Dividends Common Dividends Total Dividends Total Per Share Total Per Share Year Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 $ 36,000 72,000 171,000 207,000 261,000 324,000 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 shareExplanation / Answer
Question 1:
1.17
Question 2:
Average annual dividend per preferred share = (1.2+2.4+5.4+3+3+3) / 6 = 3 per prefered share.
Average annual dividend per Common share = (0.09 + 1.17 + 1.71 + 2.34) / 6 = 0.885 per common share.
Question 3:
Average annual percentage return on preferred stock = 3 / 156 = 1.92%
Average annual percentage return on Common stock = 0.885 / 11 = 8.05%
Preference shareholders will be given fixed dividend irrespective of profits. Their fixed dividend is $90,000. Since the preference shares are cumulative they will be paid the remaining amount which is due to to them in the previous year.