Yosemite Bike Corp. manufactures mountain bikes and distributes them through ret

Question

Yosemite Bike Corp. manufactures mountain bikes and distributes them through retail out-lets in California, Oregon, and Washington. Yosemite Bike Corp. has declared the following annual dividends over a six-year period ended December 31 of each year: 2009, $24,000; 2010, $10,000; 2011, $126,000; 2012, $100,000; 2013, $125,000; and 2014, $125,000. During the entire period, the outstanding stock of the company was composed of 25,000 shares of cumulative preferred 2% stock, $90 par, and 100,000 shares of common stock, $4 par. Determine the total dividends and per-share dividends declared on each class of stock for each of the six years. There were no dividends in arrears on January 1, 2009. Summarize the data in tabular form, using. the following column headings: Determine the average annual dividend per share for each class of stock for the six-year period. Assuming a market price of $100 for the preferred stock and $5 for the common stock, calculate the average annual percentage return on initial shareholders' investment, based on the average annual dividend per share for preferred stock and for common stock.

Explanation / Answer

Yosemine Bike corp Type of stock Preferred Stock Common stock No of share            25,000                      100,000 Par value                    90                                   4 Total Value      2,250,000                      400,000 Dividend % 2% Cum Total Dividend            45,000 Market Price                  100                                   5 Preferecnce Diviend Arrear Preferrence dividend Common Dividend Year Total Dividends Total   per share Total   per share              2,009                         24,000         24,000                  0.96              21,000                    -                      -                2,010                         10,000         10,000                  0.40              56,000                    -                      -                2,011                      126,000      101,000                  4.04                       -             25,000                0.25              2,012                      100,000         45,000                  1.80                       -             55,000                0.55              2,013                      125,000         45,000                  1.80                       -             80,000                0.80              2,014                      125,000         45,000                  1.80                       -             80,000                0.80                10.80                2.40 Preferred stock Par value                    90 Capital gain                      10 Total dividend per share in 6 years              10.80 Total return per share in 6 years              20.80 Average annual return= $            3.47 % Average Annual return Preferred stock 3.85% Common stock Par value                      4 Capital gain                        1 Total dividend per share in 6 years                2.40 Total return per share in 6 years                3.40 Average annual return= $            0.57 % Average Annual return Common stock 14.17%

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