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: Year 1, $36,000; Year 2, $108,000; Year 3, $162,000; Year 4, $207,000; Year 5, $261,000; and Year 6, $315,000. During the entire period ending December 31 of each year, the outstanding stock of the company was composed of 30,000 shares of cumulative, 3% preferred 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 Year 1. 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

Year

Total Dividends

Total

Per Share

Total

Per Share

Year 1

$   36,000

$fill in the blank 1

$fill in the blank 2

$fill in the blank 3

$fill in the blank 4

Year 2

108,000

fill in the blank 5

fill in the blank 6

fill in the blank 7

fill in the blank 8

Year 3

162,000

fill in the blank 9

fill in the blank 10

fill in the blank 11

fill in the blank 12

Year 4

207,000

fill in the blank 13

fill in the blank 14

fill in the blank 15

fill in the blank 16

Year 5

261,000

fill in the blank 17

fill in the blank 18

fill in the blank 19

fill in the blank 20

Year 6

315,000

fill in the blank 21

fill in the blank 22

fill in the blank 23

fill in the blank 24

$fill in the blank 25

$fill in the blank 26

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	$fill in the blank 27 per share
Average annual dividend for common	$fill in the blank 28 per share

3. Assuming a market price per share of $185 for the preferred stock and $15 for the common stock, determine the average annual percentage return on initial shareholders' investment, based on the average annual dividend per share for preferred stock and for common stock.

Round your answers to two decimal places.

Preferred stock	fill in the blank 29 %
Common stock	fill in the blank 30 %

Answer 1

1.

		Preferred Dividends			Common Dividends
Year	Total Dividends	Total	Per Share	Total Arrears at year end	Total	Per Share
Year 1	$36,000	$36,000	$1.20	$54,000	$0	$0.00
Year 2	$1,08,000	$1,08,000	$3.60	$36,000	$0	$0.00
Year 3	$1,62,000	$1,26,000	$4.20	$0	$36,000	$0.36
Year 4	$2,07,000	$90,000	$3.00	$0	$1,17,000	$1.17
Year 5	$2,61,000	$90,000	$3.00	$0	$1,71,000	$1.71
Year 6	$3,15,000	$90,000	$3.00	$0	$2,25,000	$2.25
Total		$5,40,000			$5,49,000

2.

	Preferred	Common
Total dividend for 6 years	$5,40,000	$5,49,000
/ Number of years	6	6
Total Annual Dividend	90000	91500
/ Number of shares	30000	100000
Average annual dividend per share	$3.00	$0.92

3.

Average annual dividend per share	$3.00	$0.92
/Market Price	$185.00	$15.00
Average annual percentage return	1.62%	6.13%