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Dividends on Preferred Shares

A corporation has 100,000 shares of 7 percent cumulative preferred stock and 40,000 shares of common stock outstanding.Par value for each is $10. no dividends were paid last year, but this year a $150,000 dividend is paid.

a) how much of this $150,000 goes to the holders of preferred stock?

b)Assume the same facts as in Question 7, except that the preferred stock is non-cumulative.how much of the $150,000 now goes to the holders of the common stock?

Solution Preview

Answers are in the attached file:
A corporation has 100,000 shares of 7 percent cumulative preferred stock and 40,000 shares of common stock outstanding.Par value for each is $10. no dividends were paid last year, but this year a $150,000 dividend is paid.

a) how much of this $150,000 goes to the holders of preferred stock?

# of Preferred shares= 100,000
Par value of Preferred shares= $10.00
Dividend (per share) on preferred shares @ 7% = $0.70 =7.% x ...

Solution Summary

Amount of dividends to preferred share holders has been calculated.

$2.19