Consider the following case: John Smith is a archaeologist with a Ph.D. He has excavated sites across much of South America and
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Answer:
Total preference dividend = $7,500
Equity dividend = $11,500 - $7,500 = $4,000
Explanation:
Total of stockholder's equity = $280,000
Less: Retained Earnings = $150,000
Less: Equity = $80,000
Preference Capital = $50,000
Rate of preference capital = 5%
Preference Dividend if in arrears would have to be paid first in priority to Equity.
Total preference dividend in arrears = $50,000 5% = $2,500 per year
For 2 years = $2,500 2 = $5,000
In the current year also firstly preference will be paid, therefore current year preference dividend = $2,500
Total preference dividend = $7,500
Equity dividend = $11,500 - $7,500 = $4,000