11A-11 11A-8. LILL Corporation has issued 1,500 shares of preferred stock, which

Question

11A-11 11A-8. LILL Corporation has issued 1,500 shares of preferred stock, which have a par value of $60 each. The preferred dividend rate on this stock is 5% of par value. LILL has also issued 18,000 shares of common stock. Calculate how much dividend would be paid to the owners of the preferred and common stock under each of the following scenarios: dividend payment is $3,000. b. Same as a. but with a total dividend payment of $12,000. a. The preferred stock is neither cumulative nor participating. The total c. The preferred stock is cumulative but not participating. Dividends were up- to-date for all years prior to two years ago. However, no dividends have been paid for the last two years. This year LILL announces a total dividend payment of $10,500. d. Same as c. but with a total dividend payment of $25,500. e. The preferred stock is not cumulative but it is participating. Once the common stockholders get an amount per share equal to the dividend of the preferred shareholders, then the two groups share equally in dividends on a per share basis. LILL announces a total dividend payment of $4,000. f. Same as e. but with a total dividend payment of $10,500. g. Same as e. but with a total dividend payment of $95,000. h. All other things being equal, which of these features would you like to have associated with preferred stock that you own?

Explanation / Answer

Preferred ($)

Common ($)

Total

3000

               Balance to common

3000

4500

               Balance to common

7500

12000

9000

               Current dividends

1500

               Balance to common

0

10500

9000

               Current dividends

4500

               Balance to common

12000

25500

4000

               Pro rata share to common

0

               Participating preferred

0

               Balance to Common

0

4000

4500

               Pro rata share to common

0

               Participating preferred

0

               Balance to Common

6000

10500

4500

               Pro rata share to common

54000

               Participating preferred

2800

               Balance to Common

33700

95000

          h.

Cumulative preference share

Preferred ($)

Common ($)

Total

1. Current dividends

3000

               Balance to common

3000

1. Current dividends

4500

               Balance to common

7500

12000

1. Dividend in arrears

9000

               Current dividends

1500

               Balance to common

0

10500

1. Dividend in arrears

9000

               Current dividends

4500

               Balance to common

12000

25500

1. Current dividend

4000

               Pro rata share to common

0

               Participating preferred

0

               Balance to Common

0

4000

1. Current dividend

4500

               Pro rata share to common

0

               Participating preferred

0

               Balance to Common

6000

10500

1. Current dividend

4500

               Pro rata share to common

54000

               Participating preferred

2800

               Balance to Common

33700

95000

          h.

Cumulative preference share

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