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    Fritz: Calculate Dividend per share to common shareholders

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    Fritz Corporation has 800,000 shares of stock and 1,800,000 shares of common stock. The cumulative preferred stock has a stated dividend of $2.50 per share. Under normal conditions, Kreisler pays out 30% of earnings available to common stockholders; however, because of a severe recession, Fritz retained all earnings last year. This year, Fritz earned net income of $6.4 million. Calculate the dividend per share to be received by the common stockholders this year.

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    Solution Preview

    Assumptions about the problem:

    1. The 800,000 shares of stock belong to the preferred shareholders, and are separate from the 1.8M shares of common stock.
    2. The preferred dividends were not paid in the prior year and accumulate into the current ...

    Solution Summary

    The solution explains about the cumulative amounts for preferred shareholders, and lists assumptions used to solve the problem. There are two alternative solutions.