Jim Corporation pays its cumulative preferred stockholders $2.50 per share. Jim
ID: 2715669 • Letter: J
Question
Jim Corporation pays its cumulative preferred stockholders $2.50 per share. Jim has 30,000 shares of preferred and 70,000 shares of common. In 2013, 2014, and 2015, due to slowdowns in the economy, Jim paid no dividends. Now in 2016, the board of directors decided to pay out $640,000 in dividends.
How much of the $640,000 does each class of stock receive as dividends?
PREFERRED STOCK;
COMMON STOCK:
How much of the $640,000 does each class of stock receive as dividends?
PREFERRED STOCK;
COMMON STOCK:
Explanation / Answer
No. of preference shares = 30000
Dividend per preference share = $2.5
The company will have to pay the arrears of dividend to preference stockholders for 2013, 2014, 2015. Also it will pay current year dividend for 2016.
Total Dividend received by preference stockholders = (2.5 * 30000)*4 years = $300000
Total Dividend received by equity stockholders = 640000 - 300000 = $340000
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