Question

Olease answer parts A through C.

If preferred dividends are cumulative, then prior unpaid dividends must be paid in addition to the current year's dividend, before common stockholders can received any dividends. upon purchase, preferred shareholders receive all prior paid dividends. each periods dividend is greater than the prior dividend.

Answer 1

	SOLUTION : 1)
	If Preferred sahres are cumulative than
	Preferred shares are cumulative means if the dividend is not paid in years due to some reason than
	dividend should be accumulated and paid later before dividend paid to common shares
	as per above explanation,
	Answer = Option 1
	SOLUTION : 2)
	Cash dividend is always paid to only shares outstanding during that time,
	Shares outstanding =	6,30,000	Shares
	Dividend Per Shares	$                    4
	Cash dividend paid by the firm = 630,000 Shareas X $ 4 =	$   25,20,000
	Answer = $ 2,520,000
	SOLUTION : 3)
	In reverse stock split par value of shares are added back in proportion of ration of reverse stock split
	Reverse stock split is done and 1 shares are issued against 2 Shares outstanding. Par value of the
	shares will increase from $ 0.11 to $ 0.22 but shares outstanding is decreases from 580,000 Shares to
	290,000 Shares
	And value of the shares will be = 290,000 Shares X $ 0.22 =	$         63,800
	Answer = $ 63,800