Preferred Stock Alternatives
Easy Moncy, Inc., has the following capital structure:
Preferred stock— $25 par value, 10,000 shares authorized, 7,000 shares issued and outstanding | $ 175,000 |
Common stock— $10 par value, 100,000 shares authorized, 80,000 shares issued and outstanding | 800,000 |
Total paid-in capital | $ 975,000 |
Retained earnings | 550,000 |
Total stockholders’ equity | $1,525,000 |
The number of issued and outstanding shares of both preferred and common stock have been the same for the last two years. Dividends on preferred stock are 8 percent of par value and have been paid each year the stock was outstanding except for the immediate past year. In the current year, management declares a total dividend of $60,000. Indicate the amount that will be paid to both preferred and common stockholders assuming (a) the preferred stock is not cumulative and (b) the preferred stock is cumulative.
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