Question

Hometown​ Grocery, Inc. has 50 comma 000 shares of common stock outstanding and 4 comma 000 shares of preferred stock outstanding. The common stock is $ 4.00 par​ value; the preferred stock is 9​% noncumulative with a $ 100.00 par value. On October​ 15, 2018, the company declares a total dividend payment of $ 54 comma 000. What is the amount of dividend that will be paid for each share of common​ stock? ​(Round your answer to the nearest​ cent.)

Answer 1

Answer:

$0.36 per share

Step-by-step explanation:

The data provided in the question are as follows

Common stock outstanding = 50,000 shares

Preferred stock outstanding = 4,000 shares

Par value of common stock = $4

Interest rate and par value of preferred stock = 9% and $100

Total dividend payment declared = $54,000

So, the amount of dividend for each share of common stock is

= (Total dividend payment declared - Preferred stock outstanding × interest rate × par value) ÷ (common stock outstanding)

= ($54,000 - 4,000 × $100 × 9%) ÷ (50,000 shares)

= ($54,000 - $36,000) ÷ (50,000 shares)

= $18,000 ÷ 50,000 shares

= $0.36 per share