Dividends on Preferred and Common Stock Yosemite Bike Corp. manufactures mountai
ID: 2617273 • Letter: D
Question
Dividends on Preferred and Common Stock Yosemite Bike Corp. manufactures mountain bikes and distributes them through retail outlets in California, Oregon, and Washington. Yosemite Bike has dedlared the following annual dividends over a six-year period ended December 31 of each year: Year 1, $24,000; Year 2, $10,000; Year 3, $126,000; Year 4, $100,000; Year 5, $125,000; and Year 6, $125,000. During the entire period, the outstanding stock of the company was composed of 25,000 shares of cumulative preferred 2% stock, $90 par, and 100,000 shares of common stock, $4 par. Required 1. Determine the total dividends and the per-share dividends dedared 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". Preferred Dividends Common Dividends Total Total Per Share Total Per Share Year Dividends Year 1 $24,000 Year 2 10,000 Year 3 126,000 Year 4 100,000 Year S 125,000 Year 6 125,000 2. Determine the average annual dividend per share for each class of stock for the six-year period. Round your answers to two decimal places per share Average annual dividend for preferred stock Average annual dividend for common stock per share 3. Assuming a market price of $100 for the preferred stock and $5 for the common stock, determine the average annual percentage return on initial shareholders' investment, based on the average annual dividend per share (A) for preferred stock and (B) for common stock. Round your answers to two decimal places. Preferred stock Common stock Check My Work PreviousNextExplanation / Answer
1 Preferred Dividend Common Dividends Year Total Dividends Total Per Share Arrears Total Per Share Year 1 $ 24,000.00 $ 24,000.00 $ 0.96 $ 21,000.00 $ - $ - (24000/25000) (45000-24000) Year 2 $ 10,000.00 $ 10,000.00 $ 0.40 $ 56,000.00 (10000/25000) (21000+45000-10000) Year 3 $ 126,000.00 $ 101,000.00 $ 4.04 $ - $ 25,000.00 $ 0.25 (45000+56000) (101000/25000) (56000+45000-101000) (126000-101000) (25000/100000) Year 4 $ 100,000.00 $ 45,000.00 $ 1.80 - $ 55,000.00 $ 0.55 (45000/25000) (45000-45000) (100000-45000) (55000/100000) Year 5 $ 125,000.00 $ 45,000.00 $ 1.80 - $ 80,000.00 $ 0.80 (45000/25000) (45000-45000) (125000-45000) (80000/100000) Year 6 $ 125,000.00 $ 45,000.00 $ 1.80 - $ 80,000.00 $ 0.80 (45000/25000) (45000-45000) (125000-45000) (80000/100000) $ 10.80 $ 2.40 No of Preference shares (A) 25000 Par Value (B) 90 Total value of Preferred Stock (C=A*B) 2250000 Dividend Rate (D) 2% Annual Dividend on Preference shares 45000 (E=C*D) 2 Average Annual dividend for preferred stock = 10.8/6 = $ 1.80 Average Annual dividend for common stock = 2.4/6 = $ 0.40 3(A) Market Price of Preferred Stock= $100.00 Average Annual dividend for preferred stock = $ 1.80 Average Annual Percentage Return= Average Annual Dividend for preferred stock/Market Price of Preferred Stock *100 = 1.8/100*100 = 1.80% 3(B) Market Price of Common Stock= $ 5.00 Average Annual dividend for common stock = $ 0.40 Average Annual Percentage Return= Average Annual Dividend for Common stock/Market Price of Common Stock *100 = 0.4/5*100 = 8.00%