Question

With the upcoming annual shareholders' meeting only a week away, the Chief Executive Officer of a business had a great deal of information to prepare. Profits for the five-year-old plastics company were at record levels and $300,000 was available for dividends to be paid. But technological advancements in the thermoforming industry were forcing individual companies to make substantial investments in advanced production capacity to remain viable. The CEO would be recommending to the board of directors a $2.5 million corporate bond issue to pay for the improved production capabilities. In addition, the company would be offering a 401(k) retirement program. Also, the first 3% of an employee's salary contributed would be fully matched by the company. Answer parts 1. through 4. 1. The company has previously issued 30,000 shares of cumulative preferred stock that will earn dividends at $0.70 per share and 70,000 shares of common stock. Because no dividends were paid last year, how will the $300,000 declared for dividends be distributed? Preferred stockholders receive S 42000 (Type an integer or a decimal.) Common stockholders receive $ 258000. (Type an integer or a decimal) Calculate the dividend per share paid to common stockholders. Common stockholders receives per share. (Round to the nearest cent as needed) Enter your answer in the answer box and then click Check Answer 2

how much were common stockholders receive per share is the question at the bottom of the photo

Answer 1

Data given in question:

• Amount available for distribution to preferred stock and common stocks - $300,000.
• Number of Cumulative preference shares = 30,000 shares and Number of Common stock shares = 70,000 shares.
• Preferred stock annual dividend payment = $21000 (i.e., 30,000 shares*$0.70per share)
• Preferred stock not paid dividend last year also and these are cumulative preferred shares hence last year dividend will also be paid to preferred stock holder before dividend to common stock holders.
• Previous year and current year dividend for preferred stock holder amounts to = $21000*2 = $42000.
• Cumulative preferred shares will be given first priority in payment of dividend to common stocks.
• Balance amount remaining after payment to cumulative preferred shares will be paid to common stocks = $300,000 - $42000 = $258000.
• Number of common stock shares = 70,000 shares

Hence Dividend per share for common stock holder = $258000/70000shares = $3.69 per share

As per above computation the common stock holder will receive $3.69 dividend per share.