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".

Year      Total Divedends      Total      Per Share      Total      Per Share
1          

2        

3

4

5

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.

Average annual dividend for preferred = $________ per share
Average annual dividend for common = $________ per share

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.

Preferred stock = ________ %
Common Stock = ________ %

Explanation / Answer

4% Preferred Stock 20000 Common stock in units 100000 Price 100 Preferred Stock Amount 2000000 Preferred Dividend 80000 Ans 1 Preferred Stock Common Stock Year Total Dividends Total Per Share total Per share 2009 32000 32000 1.6 0 0 2010 96000 80000 4 16000 0.16 2011 160000 80000 4 80000 0.8 2012 184000 80000 4 104000 1.04 2013 240000 80000 4 160000 1.6 2014 296000 80000 4 216000 2.16 Total 1008000 432000 21.6 576000 5.76 Ans 2 Average annual dividend for preferred Total dividend/No. Of years 3.6 $ Average annual dividend for common stock 5.76/6 0.96 $ Ans 3 Average Annual % return on Intial investment Average annual dividend per share/Market Price Preferred Stock 1.35 $ Common stock 4.57 $

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