Joe has common stock and preferred stock outstanding. The preferred stock has a par value of...

Joe has common stock and preferred stock outstanding. The preferred stock has a par value of $100, a dividend rate of 4.5%, and is cumulative. During the past 3 years, Joe declared and paid dividends provided at left. Compute the amount of dividends paid to preferred and common shareholders each year.

Preferred stock:
Par value	$100
Dividend rate	4.5%
Shares outstanding	100,000


Dividends declared and paid:
Year 1	400,000
Year 2	100,000
Year 3	1,250,000

Expert Solution

	1st Year	2nd Year	3rd Year
Preferred Dividend	$1004.5%100,000 = $450,000	$1004.5%100,000 = $450,000	$1004.5%100,000 = $450,000
Preferred Dividend paid	$ 400,000	$ 100,000	$400,000+$450,000 = $850,000
Preferred dividend carreid forward	$450,000 - $400,000 = $50,000	$450,000-$100,000+$50,000 = $400,000	$ -
Dividend available for common stock	$ -	$ -	$1,250,000-$850,000 = $400,000

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