(Preferred dividend) a company has an outstanding issue of $100.00 par value per
ID: 2774128 • Letter: #
Question
(Preferred dividend) a company has an outstanding issue of $100.00 par value per stock. it recently declared at $7.00 per par share dividend on its common stock. how much will the company pay in annual per-share preferred dividends if the preferred is (a) $12.00 preferred stock (b) 14% preferred stock (c) $10.00 partially participating preferred requiring that the preferred dividend increase by $0.25 for every dollar the common dividend exceeds $5.00 (d) $6.00 fully participating preferred, requiring that the preferred dividend increase equal the common dividend if the latter exceeds $6.00?
Explanation / Answer
It is assumed that the given par value is of Prefered stock in the absence of information in question as it is a common stock or preferred stock.
(b) 14% Preferred Stock=100*14%
=$ 14
The company will pay $ 14 Per share as dividends.
(c) Dividend for common stock in excess of $ 5 =$ 2
as per the requirement of question as preferred stock dividend will increase by .25 for every $ 1 the common dividend exceeds $ 5.00
Thus total conditional Preferred dividend (a)=2*.25=.50
Certaine dividend (b) = $10
Then total dividend (a) +(b)=$ 10.50
(d)
Assured Dividend= $6
Conditional Dividend: Dividend equall to Payable to Coomon Stock holder,
Thus dividend to be paid to preferred stock holder = $7 (Equall to Common Stock holder)
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