Question

Þividends 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, $48,000; 2012, $96,000; 2043, $216,000; 2014, $264,000; 2045, $348,000; and 2046, $420,000. During the entire period ended December 31 of each year, the outstanding stock of the company was composed of 30,000 shares of cumulative, preferred 4% stock, $100 par, and 100,000 shares of common stock, $20 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 $ 48,000 48,000 $ X $ х $ 0 20Y2 96,000 96,000 X X 0 20Y3 216,000 216,000 х 0 ✓ 0 ✓ 2014 264,000 120,000 х х х 2015 348,000 120,000 х х х 20Y6 420,000 120,000 х х х 1. 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 4.00 per share Average annual dividend for common X per share 3. Assuming a market price per share of $303 for the preferred stock and $26 for the common stock, determine the average annual percentage return on initial shareholders' investment, based on the average annual dividend per share (a) for þreferred stock and (b) for common stock. Round your answers to two decimal places. Preferred stock X % Common stock X %

Answer 1

A D 1 2. Year 3 20Y1 4 20Y2 5 20Y3 6 2014 B C E F Preferred Dividends Common Dividends Total Dividends Total Per Share Total Per Share $ 48,000 $ 48,000 $ 1.60 $0 $ $ 96,000$ 96,000 $ 3.20 $0 $ 216,000 $ 216,000 $ 7.20 $ $ $ 264,000 $ 120,000 $ 4.00 $144,000 $ 1.44 $ 348,000 $ 120,000 $ 4.00 $ 228,000 $ 2.28 $ 420,000 $ 120,000 $ 4.00 $ 300,000 $ 3.00 $ 24.00 $ 6.72 7 2015 8 2046 9 9 $

А B с Preferred Dividends E F Common Dividends 1 2. Year 3 2041 4 2012 5 20Y3 6 2074 7 2045 Total Dividends 48000 96000 216000 264000 348000 420000 Total Per Share Total Per Share =+B3 =+C3/30000 =+B3-c3 =+E3/100000 =+B4 =+C4/30000 =+B4-C4 =+E4/100000 = 120000+72000+24000 =+C5/30000 =+B5-C5 =+E5/100000 120000 =+C6/30000 =+B6-C6 =+E6/100000 120000 =+C7/30000 =+B7-C7 =+E7/100000 120000 =+C8/30000 =+B8-C8 =+E8/100000 =SUM(D3:08) =SUM(F3:F8) 8 2016 9

Note: Preferred dividend = 30,000*4%*$100 = $120,000 Arrears in Year 1 = $120,000 - $48,000 = $72,000 Arrears in Year 2 = $120,000 - $96,000 = $24,000 2) Average annual dividend for preferred = $24/6 = $4 2 Average annual dividend for common = $6.72/6 = $1.12 3) Average annual percentage: Preferred stock = $4/$303 = 1.32% Common stock = $1.12/$26 = 4.31%