Love Theatre Inc. owns and operates movie theaters throughout New Mexico and Uta

Question

Love Theatre Inc. owns and operates movie theaters throughout New Mexico and Utah. Love Theatre has declared the following annual dividends over a six-year period: 2011, $24,000; 2012, $72,000; 2013, $114,000; 2014, $132,000; 2015, $174,000; and 2016, $210,000. During the entire period ending December 31 of each year, the outstanding stock of the company was composed of 20,000 shares of cumulative, 3% preferred stock, $100 par, and 100,000 shares of common stock, $10 par.

Required:

1. Calculate the total dividends and the per-share dividends declared on each class of stock for each of the six years. There were no dividends in arrears on January 1, 2011. Summarize the data in tabular form. If required, round your answers to two decimal places. If the amount is zero, please enter "0".

2. Calculate the average annual dividend per share for each class of stock for the six-year period. If required, round your answers to two decimal places.

3. Assuming a market price per share of $252 for the preferred stock and $16 for the common stock, calculate the average annual percentage return on initial shareholders' investment, based on the average annual dividend per share for preferred stock and for common stock.

Round your answers to two decimal places.

Preferred Dividends Common Dividends
Year Total
Dividends
Total
Per Share
Total
Per Share 2011 $   24,000 $ $ $ $ 2012 72,000 2013 114,000 2014 132,000 2015 174,000 2016 210,000 $ $

Explanation / Answer

2011

Preferred Dividends to be payable = 3%*100*20000 = $ 60000

Preferd Dividend Paid = 24000

Deffered Prefered Dividend = 60000-24000 = 36000

Common Stock Dividend = Total Dividend Paid - Preferd Dividend Paid

Common Stock Dividend = 0

2012

Preferred Dividends to be payable = Begining Prefered Dividend + 3%*100*20000

Preferred Dividends to be payable =36000+ 60000 = 96000

Preferd Dividend Paid = 72000

Deffered Prefered Dividend = 96000-72000 = 24000

Common Stock Dividend = Total Dividend Paid - Preferd Dividend Paid

Common Stock Dividend = 72000-72000

Common Stock Dividend = 0

2013

Preferred Dividends to be payable = Begining Prefered Dividend + 3%*100*20000

Preferred Dividends to be payable =24000+ 60000 = 84000

Preferd Dividend Paid = 84000

Deffered Prefered Dividend = 84000-84000 = 0

Common Stock Dividend = Total Dividend Paid - Preferd Dividend Paid

Common Stock Dividend = 114000-84000

Common Stock Dividend = 30000

2014

Preferred Dividends to be payable = Begining Prefered Dividend + 3%*100*20000

Preferred Dividends to be payable =0+ 60000 = 60000

Preferd Dividend Paid = 60000

Deffered Prefered Dividend = 60000-60000 = 0

Common Stock Dividend = Total Dividend Paid - Preferd Dividend Paid

Common Stock Dividend = 132000-60000

Common Stock Dividend = 72000

2015

Preferred Dividends to be payable = Begining Prefered Dividend + 3%*100*20000

Preferred Dividends to be payable =0+ 60000 = 60000

Preferd Dividend Paid = 60000

Deffered Prefered Dividend = 60000-60000 = 0

Common Stock Dividend = Total Dividend Paid - Preferd Dividend Paid

Common Stock Dividend = 174000-60000

Common Stock Dividend = 114000

2016

Preferred Dividends to be payable = Begining Prefered Dividend + 3%*100*20000

Preferred Dividends to be payable =0+ 60000 = 60000

Preferd Dividend Paid = 60000

Deffered Prefered Dividend = 60000-60000 = 0

Common Stock Dividend = Total Dividend Paid - Preferd Dividend Paid

Common Stock Dividend = 210000-60000

Common Stock Dividend = 150000

2)

Average annual dividend for preferred = (1.20 + 3.60+4.20 + 3 + 3 + 3)/6 = $ 3 per share

Average annual dividend for common stock = (0+0+0.30+0.72 + 1.14 +1.5)/6 = $ 3.66 per share

3)

Preferred stock = 3/252

Preferred stock =1.19%

Common stock = 3.66/16

Common stock = 22.88%

Preferred Dividends Common Dividends Year Total Total Per Share Total Per Share Dividends 2011 24000 24000               1.20 0 0 2012 72,000 72000               3.60 0 0 2013 114,000 84000               4.20 30000        0.30 2014 132,000 60000               3.00 72,000        0.72 2015 174,000 60000               3.00 114,000        1.14 2016 210,000 60000               3.00 150,000        1.50

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