At the end of its first year of operations, Alder Co. had 150,000 shares of preferred stock, 5% cumulative, $100 par value. It also has 1,000,000 shares of common stock $0.01 par value. (The share information represents the numbers of shares issued and outstanding for both types of stock.) If sufficient dividends are declared, what is the per share dividend that will be paid on the preferred stock?

Question

Business

Katherine

11 November, 20:13

At the end of its first year of operations, Alder Co. had 150,000 shares of preferred stock, 5% cumulative, $100 par value. It also has 1,000,000 shares of common stock $0.01 par value. (The share information represents the numbers of shares issued and outstanding for both types of stock.) If sufficient dividends are declared, what is the per share dividend that will be paid on the preferred stock?

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Fernanda Riddle · Answer 1

Total preferred dividend

= 5% x $100 x 150,000 shares

= $750,000

Per share dividend that will be paid on preferred stocks

= $750,000/150,000 shares

= $5 per share

Explanation:

In this case, there is need to calculate the total preferred dividend, which is a function of dividend rate, par value and number of preferred stocks. Then, we will calculate the per share dividend by dividing the total preferred dividend by number of preferred stocks outstanding.