Kuhns Corp. has 230,000 shares of preferred stock outstanding that is cumulative and 100,000 common stocks...
Kuhns Corp. has 230,000 shares of preferred stock outstanding that is cumulative and 100,000 common stocks outstanding. The preferred dividend is $6.00 per share and has not been paid for 3 years. If Kuhns earned $1.80 million this year, what could be the maximum payment to the preferred stockholders on a per share basis?
A. 9.33
B. 10.08
C. 6.73
D. 7.83
Homework Answers
D. 7.83
Dividend in arrears = $6.00 per share × 230,000 shares × 3 years = $4,140,000
The company earned $1,800,000 this year. So, it could pay all of that to the preferred shareholders and still have an amount due. Therefore, the maximum payment to the preferred stockholders on a per share basis is $7.83, which is computed by:
= Earnings for preferred dividends in arrears / Total number of shares
= $1,800,000 / 230,000 shares
= $7.83 per share
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