Question

Pecan Theatre Inc. owns and operates movie theaters throughout Florida and Georgia. Pecan Theatre has declared the following annual dividends over a six-year period: Year 1, $48,000; Year 2, $144,000; Year 3, $228,000; Year 4, $264,000; Year 5, $336,000; and Year 6, $420,000. During the entire period ending December 31 of each year, the outstanding stock of the company was composed of 30,000 shares of cumulative, 4% preferred stock, $100 par, and 100,000 shares of common stock, $10 par.

Required:

1. Determine the total dividends and the per-share dividends declared on each class of stock for each of the six years. There were no dividends in arrears at the beginning of Year 1. Summarize the data in tabular form. If required, round your answers to two decimal places. If the amount is zero, please enter "0".

Dividends on Preferred and Common Stock Pecan Theatre Inc. owns and operates movie theaters throughout Florida and Georgia. Pecan Theatre has declared the following annual dividends over a six-year period: Year 1, $48,000; Year 2, $144,000; Year 3, $228,000; Year 4, $264,000; Year 5, $348,000; and Year 6, $420,000. During the entire period ending December 31 of each year, the outstanding stock of the company was composed of 40,000 shares of cumulative, 3% preferred stock, $100 par, and 100,000 shares of common stock, $15 par. Required: 1. Determine the total dividends and the per-share dividends declared on each class of stock for each of the six years. There were no dividends in arrears at the beginning of Year 1. Summarize the data in tabular form. If required, round your answers to two decimal places. If the amount is zero, please enter "0". Preferred Dividends Common Dividends Total Dividends Year Total Per Share Year 1 $ 48,000 $ Total 48,000 144,000 $ Year 2 144,000 Year 3 228,000 168,000 60,000 Per Share 1.60 x 4.80 x 5.60 x 4.00 x 4.00 x 4.00 x - 24 x Year 4 120,000 144,000 264,000 348,000 0.6 1.44 2.16 Year 5 120,000 216,000 x Year 6 420,000 120,000 300,000 7.2 x

2. Determine the average annual dividend per share for each class of stock for the six-year period. If required, round your answers to two decimal places.

3. Assuming a market price per share of $290 for the preferred stock and $16 for the common stock, determine the average annual percentage return on initial shareholders' investment, based on the average annual dividend per share for preferred stock and for common stock. Round your answers to two decimal places.

Answer 1

1) Preferred dividend = 30000*100*4% = 120000

		Preferred dividend		Common Dividend
Year	Total dividend	Total	per share	Total	per share
Year 1	48000	48000	1.60	0	0
Year 2	144000	144000	4.80	0	0
Year 3	228000	168000	5.60	60000	0.60
Year 4	264000	120000	4.00	144000	1.44
Year 5	336000	120000	4.00	216000	2.16
Year 6	420000	120000	4.00	300000	3.00
Total	1440000	720000	24	720000	7.20

b) Average Annual preferred dividend = 24/6 = 4 per share

Average annual common dividend = 7.20/6 = 1.20 per share

c) Average annual preferred = 4/290 = 1.38%

Average annual Common = 1.20/16 = 7.5%