Q. # 1- A company has an outstanding issue of $100.00 pa value preferred stock I
ID: 2660045 • Letter: Q
Question
Q. # 1- A company has an outstanding issue of $100.00 pa value preferred stock It recently declared a $7.00 per share dividend on its common stock. How mush will be the company pay in annual per share preferred dividends if the prefered is :
a) $12.00 preferred stock?
b) 14% preferred stock?
c) $10.00 patially participating preferred, requiring that the preferred divident increase by $0.25 for every dollar the common dividend exceeds $5.00?
d)$6.00nfull participating preferred, requiring that the preferred dividend increase to equal the common dividend if the latter exceeds $6.00.
Q#2 - (Number of shares)
A company whose charter authorize 10 million shares, has sold 6 million to the public. Of these, 5 million are in the hands of investors today.
a) Haw many shares are in issued?
b) Haw many shares are autorized but not issued?
c) Haw many shares are outstanding?
d) Haw many shares are in the treasury?
Explanation / Answer
Q. # 1- A company has an outstanding issue of $100.00 pa value preferred stock It recently declared a $7.00 per share dividend on its common stock. How mush will be the company pay in annual per share preferred dividends if the prefered is :
a) $12.00 preferred stock?
==> A)Company should pay $12 per every preferred share outstanding.
b) 14% preferred stock?
==> A)Company should pay 14% of Prferred stock face value per every preferred share outstanding
= $100 x 14% = $14 per share
c) $10.00 patially participating preferred, requiring that the preferred divident increase by $0.25 for every dollar the common dividend exceeds $5.00?
==>A)Company should pay $10 per every patially participating preferred share and dividend increase by $0.25 for every dollar the common dividend exceeds $5.00 i.e.,
= $10 + $0.25($7 - $5) = $10+$0.5 = $10.5 per share
d)$6.00 on full participating preferred, requiring that the preferred dividend increase to equal the common dividend if the latter exceeds $6.00.
==>A)Company should pay $6 per every fully participating preferred share and dividend is increased to equal common dividend , if common dividend exceeds $6.00. i.e.,
= $6 + $1 = $7 per share
Question 2 : A company whose charter authorize 10 million shares, has sold 6 million to the public. Of these, 5 million are in the hands of investors today
a) How many shares are in issued?
A) 6 million shares are issued.
b) How many shares are autorized but not issued?
A) 4 million shares are authorized but not issued
c) How many shares are outstanding?
A) 6 million shares are issued.
d) How many shares are in treasury?
A) 5 million shares are in treasury.
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