Ozark Distributing Company is primarily engaged in the wholesale distribution of
ID: 2420022 • Letter: O
Question
Ozark Distributing Company is primarily engaged in the wholesale distribution of consumer products in the Ozark Mountain regions. The following disclosure note appeared in the company’s 2013 annual report:
The Preferred Stock is convertible at any time by the holders into a number of shares of Ozark’s common stock equal to the number of preferred shares being converted times a fraction equal to $25 divided by the conversion price. The conversion prices for the Preferred Stock are subject to customary adjustments in the event of stock splits, stock dividends and certain other distributions on the Common Stock. Cumulative dividends for the Preferred Stock are payable in arrears, when, as and if declared by the Board of Directors, on March 31, June 30, September 30 and December 31 of each year.
The Preferred Stock is optionally redeemable by the Company beginning on various dates, as listed above, at redemption prices equal to 120% of the liquidation preference. The redemption prices decrease 1% annually thereafter until the redemption price equals the liquidation preference after which date it remains the liquidation preference.
Ozark Distributing Company is primarily engaged in the wholesale distribution of consumer products in the Ozark Mountain regions. The following disclosure note appeared in the company’s 2013 annual report:
places Annual Par Value Dividend Total Annual Number of Dividend per Preferred Preferredpreferred Shares Shares preferred owned dividend 250 PreferredDividend Rate Shares Dividend share shares $ 5,500,000 6.840% 250 2. If dividends are not paid in 2014 and 2015, but are paid in 2016, what amount of dividends will the shareholder receive? (Round your answer to 3 decimal places.) ount of dividends 3. If the investor chooses to convert the shares in 2014, how many shares of common stock will the investor receive for his/her 250 shares? (Round your answers to 2 decimal places.) Number of convertible referred shares owned Number ofc Conversion Factor shares received 4. If Ozark chooses to redeem the shares on June 18, 2014what amount will the investor be paid for his/her 250 shares? (Round Per Share Amounts'" to 2 decimal places except percentage values.) Per ShareTotal 250 Amounts shares 25.00 Liquidation preference Redemption Percentage Redemption price, June 18, 2012 Percent Reduction in Redemption Price Redemption price, June 18, 2014Explanation / Answer
Answer 1. Par Value Preferred Shares Dividend rate Total Annual Preferred Dividend Number of preferred Shares Dividend per preferred share Shares Owned Annual preferred dividend 250 shares $5,500,000 6.84% 376200 220000 1.71 250 427.50 Answer 2. Dividend Paid on 250 Shares paid in 2016 = $427.5 X 3 years = $1282.50 (Since the preference shares are cumulative, the unpaid or arrear of dividend are paid in 2016) Answer 3. If the investor choses to convert the shares in 2014 No. of convertible preferred shares owned Conversion Factor No. of Common shares received 250 $25/$32.66 191.37 or 191 shares The .37 fractional share can be paid in cash equla to current market price per share times 0.37. Answer 4. If Ozark chooses to redeem the shares on June 18 2014 Per Share Amount Total 250 Shares Liquid Preference $25 Redemption price June 18, 2014 $30 ($25 X 120%) Percent Reduction in Redemption Price 2% (Two years after the intial redemption) Redemption price, June 18 2014 $29.40 ($30 X 98%) $7350 ($29.40 x 250 Shares)
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