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: 2009, $32,000; 2010, $96,000; 2011, $160,000; 2012, $184,000; 2013, $240,000; and 2014, $296,000. During the entire period ending December 31 of each year, the outstanding stock of the company was composed of 20,000 shares of cumulative, 4% preferred stock, $100 par, and 100,000 shares of common stock, $15 par.

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, 2009. 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 $267 for the preferred stock and $21 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.

Explanation / Answer

Love Theatre Inc Details Share details Preference share Outstanding nos                         20,000 Par value preference share                               100 Dividend 4% Per share Preference Dividend                                    4 Total Preference Dividend per year                         80,000 Common Shares Outstanding                       100,000 Value per share                                  15 1 Details Year 2009 Year 2010 Year 2011 Year 2012 Year 2013 Year 2014 Dividends                       32,000                    96,000          160,000            184,000         240,000         296,000 Total Preference Dividend                       32,000                    96,000          112,000              80,000           80,000            80,000 Preference Dividend Arrear                       48,000                    32,000                     -                          -                       -                       -   Preference dividend per share                            1.60                         4.80                 5.60                   4.00                4.00                4.00 Total Common Stock Dividend                                 -                                -              48,000            104,000         160,000         216,000 Common Stock Dividend per share                                 -                                -                   0.48                   1.04                1.60                2.16 2 Total of Annual Dividend per preference share over six years                            24.00 Average Annual Dividend per preference share over six years $                          4.00 Total of Annual Dividend per common share over six years                              5.28 Average Annual Dividend per common share over six years $                          0.88 3 Market Price of Preference share = $                           267 Avearge annual % return=4/267= 1.50% Market Price of common share = $                             21 Avearge annual % return=0.88/21= 4.2%

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