Question

Calculate the cash dividends required to be paid for each of the following preferred stock issues: Required: The semiannual dividend on 7% cumulative preferred, $60 par value, 40,000 shares authorized, issued, and outstanding. The annual dividend on $5.20 cumulative preferred, 800,000 shares authorized, 240,000 shares issued, 171,600 shares outstanding. Last year's dividend has not been paid. The quarterly dividend on 4.8% cumulative preferred, $100 stated value, $103 liquidating value, 600,000 shares authorized, 445,000 shares issued and outstanding. No dividends are in arrears.

Answer 1

Answer:

(a) Annual dividend = Dividend rate × par value ×  number of shares outstanding

                                 = 7% ×  $60 ×  40,000

                                = $168,000

Semi‑annual dividend = $\frac{Annual\ dividend}{2}$

                                     = $\frac{168,000}{2}$

                                     = $84,000

(b) Annual dividend = Dividend rate × number of shares outstanding

                                  = $5.20 × 171,600

                                 = $892,320

Arrears of $892,320 are owed for last year as well, so the total dividends owed would be:

$892,320 × 2 years

= $1,784,640

(c) Annual dividend = Dividend rate × stated value × number of shares outstanding

                                 =  4.8% × $100 × 445,000

                                = $2,136,000

Quarterly dividend = = $\frac{Annual\ dividend}{2}$

                                     = $\frac{2,136,000}{4}$

                                     = $534,000