Dividends Andrews Company has $80,000 available to pay dividends. It has 2,000 s
ID: 2559124 • Letter: D
Question
Dividends Andrews Company has $80,000 available to pay dividends. It has 2,000 shares of 10%, $100 par, preferred stock and 30,000 shares of $10 par common stock outstanding. The preferred stock is selling for $125 per share, and the common stock is selling for $20 per share. Required 1. Determine the amount of dividends to be paid to each class of shareholder for each of the following independent assumptions. If an amount box required no entry, leave it blank. a. Preferred stock is nonparticipating and noncumulative. Andrews Company Schedule of dividends to be paid Preferred Common Preferred dividend $ Remainder $ Total $ $ b. Preferred stock is nonparticipating and cumulative. Preferred dividends are 2 years in arrears at the beginning of the year. Andrews Company Schedule of dividends to be paid Preferred Common Dividends in arrears $ $ Current preferred dividend Remainder Total $ $ c. Preferred stock is fully participating and cumulative. Preferred dividends are 1 year in arrears at the beginning of the year. Andrews Company Schedule of dividends to be paid Preferred Common Dividends in arrears $ $ Current preferred dividends Common proportional share Remainder Total $ $ 2. For 1(a), compute the dividend yield on the preferred stock and the common stock. Dividend yield Preferred stock % Common stock % No Check My Work uses Previous
Explanation / Answer
1a)
(20000*2)past year+ 20000
40000+20000
60000
44000
**Preferred dividend per year :2000*100*.10= 20000
for case c)preferred dividend paid (before participation) =20000current+20000last year=40000
Common stock outstanding: 30000*10= 300000
Common stock dividend up to rate paid on preferred stock(10% dividend) = 300000*10%= 30000
Total dividend paid = 40000preferred +30000 common =70000
dividend available for participation = 80000-70000 =10000 to be distributed in capital ratio
Total capital = 200000 preferred+300000common stock =500000
preferred: 10000*200000/500000=4000
common stock :10000*300000/500000= 6000
Total preferred dividend :40000+4000=44000
common stock : 30000+6000= 36000
2)Dividend yield =Dividend /price
Preferred dividend per share in 1(A)= 20000/2000=$ 10per share
dividend yield =10/125 = .08 or 8%
common stock dividend per share=60000/30000=$ 2
Dividend yield : 2/20
= .10 or 10%
2)
Preferred common stock total case a 20000 80000-20000=60000 80000 case b(20000*2)past year+ 20000
40000+20000
60000
80000-60000=20000 80000 case c44000
36000 80000