Question

Preferred dividends Acura Labs Inc. has an outstanding issue of preferred stock with a par value of $40 and an 8% annual dividend. a. What is the annual dollar dividend? If it is paid quarterly, how much will be paid each quarter? b. If the preferred stock is noncumulative and the board of directors has passed the preferred dividend for the last 4 quarters, how much must be paid to preferred stockholders in the current quarter before dividends are paid to common stockholders? c. If the preferred stock is cumulative and the board of directors has passed the preferred dividend for the last 4 quarters, how much must be paid to preferred stockholders in the current quarter before dividends are paid to common stockholders? et a. The annual dollar dividend is $ (Round to the nearest cent.) If it is paid quarterly, the amount paid each quarter will be $ (Round to the nearest cent.) b. If the preferred stock is noncumulative and the board of directors has passed the preferred dividend for the last 4 quarters, the amount that must be paid to preferred stockholders in the current quarter before dividends are paid to common stockholders is $ (Round to the nearest cent.) c. If the preferred stock is cumulative and the board of directors has passed the preferred dividend for the last 4 quarters, the amount that must be paid to preferred stockholders in the current quarter before dividends are paid to common stockholders is $ (Round to the nearest cent.)

Answer 1

Par value of Preferred Stock = $40 Annual Dividend = 8%. (9) Annual Dollar Dividend = Par value x Annual Dividend = $40 X & = $3.2 of the dividend is baid quarterly, the amount paid in each quarter will be - Annual Dollar Dividend No. of quarter in year = $300 = $ 0.8 ve (6) Non- cumulative preferred stocks are those preferred stocks on which if dividend is not paid then the dividend (which is not paid) do not accumulate over time. This means that company will not pay the passed dividends. So, on current quarter, the shareholders will be paid only quarterly dividend of $0.8 on preferred Stock

Cumulative preferred stock means that if dividend is bassed or not paid , then it will accumulate over time and the company will have to pay the passed Dividend, passed Dividend for 4 quarters = 4x $0.8 = $3.2 . Current Quarter Dividend = $0.8 Total Dividend payment to preferred Stockholder = $3,2+$0.8 i = $ 4.0