Love Theatre Inc. owns and operates movie theaters throughout New Mexico and Uta
ID: 2492718 • Letter: L
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, $64,000; 2010, $192,000; 2011, $320,000; 2012, $352,000; 2013, $464,000; and 2014, $592,000. During the entire period ending December 31 of each year, the outstanding stock of the company was composed of 40,000 shares of cumulative, 4% preferred stock, $100 par, and 100,000 shares of common stock, $15 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, 2009. Summarize the data in tabular form. If required, round your answers to two decimal places. If the amount is zero, please enter "0".
$ per share
3. Assuming a market price per share of $183 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 Dividends Common DividendsYear Total
Dividends
Total
Per Share
Total
Per Share 2009 $ 64,000 $ $ $ $ 2010 192,000 2011 320,000 2012 352,000 2013 464,000 2014 592,000 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 $183 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
Answer 1. Year Total Dividends Preferred Dividends Common Dividends Total Per Share Total Per Share 2009 64,000 64,000 1.60 - - 2010 192,000 192,000 4.80 - - 2011 320,000 224,000 5.60 96,000 0.96 2012 352,000 160,000 4.00 192,000 1.92 2013 464,000 160,000 4.00 304,000 3.04 2014 592,000 160,000 4.00 432,000 4.32 Total 1,984,000 960,000 1,024,000 Pref. Share Dividend = 40000 Shares X $100 X 4% = $160,000 Since, the Preference shares are cummulative, then the defecit in Dividend will be paid in next year in which there is enough profit to pay the same Year Total Dividends Preference Dividends Due Preferred Dividends Paid Defecit of preference Div. 2009 64,000 160,000 64,000 96,000 2010 192,000 160,000 192,000 64,000 2011 320,000 160,000 224,000 - 2012 352,000 160,000 160,000 - 2013 464,000 160,000 160,000 - 2014 592,000 160,000 160,000 - Answer 2. Total Div. Paid Avg. Dividend per Year Div. per Share in $ Avg Annual Div for Preferred 960,000.00 160,000.00 4.00 Avg Annual Div for Common 1,024,000.00 170,666.67 1.71 Answer 3. Average Annual % return on intial shareholders investments Preferred Stock = 4/100 = 4% Common Stock = 1.71 / 15 = 11.40%
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