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Seventy-Two Inc., a developer of radiology equipment, has stock outstanding as follows: 81,100 shares of cumulative...

Seventy-Two Inc., a developer of radiology equipment, has stock outstanding as follows: 81,100 shares of cumulative preferred 2% stock, $15 par, and 400,100 shares of $25 par common. During its first four years of operations, the following amounts were distributed as dividends: first year, $55,500 ; second year, $77,500 ; third year, $80,500 ; fourth year, $100,900 .

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) $ $ $ $

Solutions

Expert Solution

Par value per preferred share

Dividend rate

Dividend per preferred share

Number of preferred shares

Preferred dividend

Annual preferred dividend

$15

2%

15 x 2% = 0.30

81,100

81,100 x 0.30 = 24,330

Years

Total cash dividend paid (i)

Paid to preferred (ii)

Paid to common (i - ii)

Dividend in arrears at year end

1

55,500

24,330

31,170

0

2

77,500

24,330 53,170

0

3

80,500

24,330 56,170

0

4

100,900

24,330 76,570

0

$314,400

$97,320

$217,080

0

·

Preferred stock (Dividend per share)

Common stock (Dividend per share)

First year

$0.30

31,170/400,100 = $0.08

Second year

$0.30

53,170/400,100 = $0.13

Third year

$0.30

56,170/400,100 = $0.14

Fourth year

$0.30

76,570/400,100 = $0.19

·

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

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