Question

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: 20Y1, $40,000; 20Y2, $80,000; 20Y3, $190,000; 20Y4, $230,000; 2015, $280,000; and 2016, $360,000. During the entire period ended December 31 of each year, the outstanding stock of the company was composed of 25,000 shares of cumulative, preferred 4% 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 20Y1. 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 Total Per Share 20Y1 $ 40,000 2012 80,000 2093 190,000 2014 230,000 2015 280,000 2016 360,000 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. Average annual dividend for preferred per share Average annual dividend for common $ per share 3. Assuming a market price per share of $333 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 (a) for preferred stock and (b) for common stock. Round your answers to two decimal places. Preferred stock Common stock

Answer 1

Dividend distribution

Preferred dividend = 25000*100*4% = 100000

		Preferred dividend		Common Dividend
Year	Total dividend	Total	per share	Total	Per share
20Y1	40000	40000	1.60	0	0
20Y2	80000	80000	3.20	0	0
20Y3	190000	180000	7.20	10000	0.10
20Y4	230000	100000	4	130000	1.30
20Y5	280000	100000	4	180000	1.80
20Y6	360000	100000	4	260000	2.60
Total		600000	24	580000	5.8

2) Average dividend per share Preferred Stock = 24/6 = 4

Average dividend per share common Stock = 5.8/6 = 0.97

3) Preferred dividend = 4/333 = 1.20%

Common Stock = 0.97/16 = 6.06%