Annual preferred dividends = Number of preferred shares x Par value per preferred share x Dividends rate
= 30,000 x 150 x 3%
= $135,000
Year | Preferred Dividend | Common Dividend | Total Dividend |
1 | 135,000 | 67,500 | 202,500 |
2 | 67,500 | 0 | 67,500 |
3 | 202,500 | 202,500 | 405,000 |
In the year 2, $67,500 dividend was paid only and it would be paid to preferred stock holders only.
Dividends in arrears on preferred stock in year 2 = Annual dividends - Dividends paid
= 135,000-67,500
= $67,500
Hence, in the year 3, dividend to be paid to preferred stock holders would be = Annual dividends + Arrears of dividends
= 135,000+67,500
= $202,500
Year 1 | Year 2 | Year 3 | |
Preferred stock ( Dividends per share) | 135,000/30,000 = 4.5 | 67,500/30,000 = 2.25 | 202,500/30,000= 6.75 |
Common stock ( Dividends per share) | 67,500/50,000 = 1.35 | 0 | 202,500/50,000 = 4.05 |
Kindly comment if you need further assistance. Thanks‼!
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