Question

Dividends Per Share

Seventy-Two Inc., a developer of radiology equipment, has stock outstanding as follows: 80,900 shares of cumulative preferred 2% stock, $15 par, and 398,600 shares of $24 par common. During its first four years of operations, the following amounts were distributed as dividends: first year, $55,600 ; second year, $77,800 ; third year, $78,100 ; fourth year, $101,900 .

Calculate the dividends per share on each class of stock for each of the four years. Round all answers to two decimal places. If no dividends are paid in a given year, enter "0".

	1st Year	2nd Year	3rd Year	4th Year
Preferred stock (dividends per share)	$	$	$	$
Common stock (dividends per share)	$	$	$	$

Answer 1

Answer :-

Answer :-

The dividends per share on each class of stock for each of the four years are as follows :-

	1st year	2nd year	3rd year	4th year
Preferred Stock (Dividend per share)	$0.30	$0.30	$0.30	$0.30
Common Stock (dividend per share)	$0.08	$0.13	$0.14	$0.19

First we calculate the Preferred share dividend as preferred share get dividend first and then remaining dividend is distributed among the common stock holder. Here ,it was given that preferred share are cumulative it mean that when prefPreff share do not get dividend in any year than they will get those dividend in the future years.

Preferred stock Dividend = (No of preferred stock × Par value ) × Peferred dividend %

No.of preferred stock = 80,900 shares

Par Value = $ 15

Peferred dividend % = 2%

Preferred share dividend = (80,900 × $15) × 2%

Preferred share dividend = $24,270

In Year 1 -

Dividend distributed = $ 55,600

Dividend distributed to Peferred stock - $24,270

Dividend per share of preferred stock = $24,270 / 80,900 preferred stock = $0.30

Dividend distributed to common stock = $55,600 Dividend distributed - $24,270 Dividend distributed to preferred stock = $55,600 - $24,270 = $31,330

No.of Common stock = 398,600 Common stock

Dividend per share of common stock = $31,330 / 398,600

Dividend per share of Common stock = 0.08 (approx)

In year 2 -

Dividend distributed = $ 77,800

Dividend distributed to Peferred stock - $24,270

Dividend per share of preferred stock = $24,270 / 80,900 preferred stock = $0.30

Dividend distributed to common stock = $77,800 Dividend distributed - $24,270 Dividend distributed to preferred stock = $77,800 - $24,270 = $53,530

No.of Common stock = 398,600 Common stock

Dividend per share of common stock = $53,530 / 398,600

Dividend per share of Common stock = 0.13

In Year 3 -

Dividend distributed = $ 78,100

Dividend distributed to Peferred stock - $24,270

Dividend per share of preferred stock = $24,270 / 80,900 preferred stock = $0.30

Dividend distributed to common stock = $78,100 Dividend distributed - $24,270 Dividend distributed to preferred stock = $78,100 - $24,270 = $53,830

No.of Common stock = 398,600 Common stock

Dividend per share of common stock = $53,830 / 398,600

Dividend per share of Common stock = 0.14 (approx )

In Year 4 -

Dividend distributed = $ 101,900

Dividend distributed to Peferred stock - $24,270

Dividend per share of preferred stock = $24,270 / 80,900 preferred stock = $0.30

Dividend distributed to common stock = $101,900 Dividend distributed - $24,270 Dividend distributed to preferred stock = $101,900 - $24,270 = $77,630

No.of Common stock = 398,600 Common stock

Dividend per share of common stock = $77,630 / 398,600

Dividend per share of Common stock = 0.19(approx )