Calculate the annual cash dividends required to be paid for each of the followin

Question

Calculate the annual cash dividends required to be paid for each of the following preferred stock issues:

Required:

a. $4.75 cumulative preferred, no par value; 400,000 shares authorized, 325,000 shares issued. (The treasury stock caption of the stockholders' equity section of the balance sheet indicates that 40,600 shares of this preferred stock issue are owned by the company.

b. 5%, $50 par value preferred, 200,000 shares authorized, 172,000 shares issued, and 68,500 shares outstanding.

c. 7.4% cumulative preferred, $100 stated value, $104 liquidating value; 80,000 shares authorized, 63,200 shares issued, 57,600 shares outstanding.

Explanation / Answer

a.

Shares Eligible for dividends =  Shares issued - treasury stock =  325,000 - 40,600 = 284,400  preferred stock

Dividends = $4.75 * 284,400  preferred stock = $1,350,900

b.

Shares Eligible for dividends =  Shares outstanding = 68,500 preferred stock

Dividends = Par value * % * Shares  outstanding = $50 * 5 % * 68,500 shares = $171,250

c.

Shares Eligible for dividends =  Shares  outstanding = 57,600 preferred stock

Dividends = Sateted value * % * Shares  outstanding = $100 * 7.4 % * 57,600 shares = $426,240

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