Dividends on Preferred and Common Stock Pecan Theatre Inc. owns and operates mov
ID: 2542860 • 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, $80,000; Year 2, $90,000; Year 3, $150,000; Year 4 $150,000; Year 5, $160,000; and Year 6, $180,000. During the entire period ended December 31 of each year, the outstanding stock of the company was composed of 250,000 shares of cumulative, preferred 2% stock, $20 par, and 500,000 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 "O"Explanation / Answer
Solution 1 & 2:
Average annual dividends on preferred stock = $0.40 per share
Average annual dividends on common stock = $0.07 per share
Solution 3:
Average annual percentage return on preferred stock = Average annual dividend/ Market price per share
= $0.40 / $25 = 1.60%
Average annual percentage return on common stock = Average annual dividend/ Market price per share
= $0.07 / $17.50 = 0.40%
Determination of total dividends and per share dividends declared on each class of stocks and average annual dividends Year Total Dividends Preferred Dividends Common Dividends Total Total Dividends in Arrear Per Share Total Per Share Year 1 $80,000.00 $80,000.00 $20,000.00 $0.32 $0.00 $0.00 Year 2 $90,000.00 $90,000.00 $30,000.00 $0.36 $0.00 $0.00 Year 3 $150,000.00 $130,000.00 $0.00 $0.52 $20,000.00 $0.04 Year 4 $150,000.00 $100,000.00 $0.00 $0.40 $50,000.00 $0.10 Year 5 $160,000.00 $100,000.00 $0.00 $0.40 $60,000.00 $0.12 Year 6 $180,000.00 $100,000.00 $0.00 $0.40 $80,000.00 $0.16 Average Annual Dividends $100,000.00 $0.40 $35,000.00 $0.07