Dividends on Preferred and Common Stock Love Theatre Inc. owns and operates movi
ID: 2540029 • Letter: D
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, $48,000; 2012, $144,000; 2013, $216,000; 2014, $276,000; 2015, $336,000; and 2016, $432,000. During the entire period ending December 31 of each year, the outstanding stock of the company was composed of 40,000 shares of cumulative, 3% preferred stock, $100 par, and 100,000 shares of common stock, $15 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 "O". Preferred Dividends Common Dividends Total Dividends Total Per Share Total Per Share Year 2011 2012 2013 2014 2015 2016 48,000 144,000 216,000 276,000 336,000 432,000 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 Average annual dividend for preferred Average annual dividend for commorn per share per share 3. Assuming a market price per share of $201 for the preferred stock and $20 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 stock Common stockExplanation / Answer
Answer 1
Cumulative Preferred stock annual dividend = 40,000 shares * $100 * 3 % =$120,000
Note :Per share = Total Dividend paid / No of shares.
Answer 2
Average annual dividend per share for Preferred stock = Total of Preferred Dividends per share / 6 years
= $18 / 6 years = $3 per share
Average annual dividend per share for Common stock = Total of Common Dividends per share / 6 years
= $7.32 / 6 years = $1.22 per share.
Answer 3
Annual percentage return for Preferred stock =
Average annual dividend per share for Preferred stock / Market price per share = ($3 / $201) *100 = 1.49 %
Annual percentage return for Common stock =
Average annual dividend per share for Common stock / Market price per share = ($1.22 / $20) *100 = 6.1 %
Preferred Dividends Common Dividends Year Total Dividends ($) Total ($) Per Share($) Total ($) Per Share ($) 2011 48,000 48,000 [ outstanding = 120,000 - 48,000 = 72,000] 1.20 0 0 2012 144,000 144,000 [ outstanding = 120,000 + 72,000 -144,000 = 48,000] 3.6 0 0 2013 216,000 1,68,000 [120,000 + 48,000] [outstanding = 0] 4.2 48,000 0.48 2014 276,000 120,000 3 156,000 1.56 2015 336,000 120,000 3 216,000 2.16 2016 432,000 120,000 3 312,000 3.12 Total $18 Total $7.32