Enterprise Storage Company has 450,000 shares of cumulative preferred stock outstanding, which has a stated dividend...

Enterprise Storage Company has 450,000 shares of cumulative preferred stock outstanding, which has a stated dividend of $8.75. It is six years in arrears in its dividend payments. Use Appendix B for an approximate answer but calculate your final answer using the formula and financial calculator methods.

a. How much in total dollars is the company behind in its payments? (Do not round intermediate calculations. Input your answer in dollars, not millions (e.g., $1,234,000).)
Dividend in arrears-?

b. The firm proposes to offer new common stock to the preferred stockholders to wipe out the deficit. The common stock will pay the following dividends over the next four years:


D₁	$	1.20
D₂		1.30
D₃		1.40
D₄		1.50

The company anticipates earnings per share after four years will be $4.10 with a P/E ratio of 11.

The common stock will be valued as the present value of future dividends plus the present value of the future stock price after four years. The discount rate used by the investment banker is 11 percent.

Compute the value of the common stock. (Do not round intermediate calculations and round your answer to 2 decimal places.)
Common stock-?

c. How many shares of common stock must be issued at the value computed in part b to eliminate the deficit (arrearage) computed in part a? (Do not round intermediate calculations and round your answer to the nearest whole share.)

number of shares of common stuck-?

Expert Solution

a. Dividend in Arrears = Preferred Stock * Dividend Amount* years in arrears

Dividend in Arrears = 450000 * 8.75 * 6

Dividend in Arrears = $23625000

b. Value of Stock = $45.50

c. How many shares of common stock must be issued at the value computed in part b to eliminate the deficit (arrearage) computed in part a? (Do not round intermediate calculations and round your answer to the nearest whole share.)

# of shares to be issued = Preferred dividend in arrears / Stock value

# of shares to be issued = 23625000 / 45.50

# of shares to be issued = 519282 Shares

jeff jeffy answered 1 year ago

Enterprise Storage Company has 600,000 shares of cumulative preferred stock outstanding, which has a stated dividend...

Enterprise Storage Company has 600,000 shares of cumulative preferred stock outstanding, which has a stated dividend of $6.65. It is six years in arrears in its dividend payments. Use Appendix B for an approximate answer but calculate your final answer using the formula and financial calculator methods. a. How much in total dollars is the company behind in its payments? (Do not round intermediate calculations. Input your answer in dollars, not millions (e.g., $1,234,000).) b. The firm proposes to offer...

Enterprise Storage Company has 550,000 shares of cumulative preferred stock outstanding, which has a stated dividend...

Enterprise Storage Company has 550,000 shares of cumulative preferred stock outstanding, which has a stated dividend of $8.75. It is six years in arrears in its dividend payments. Use Appendix B for an approximate answer but calculate your final answer using the formula and financial calculator methods. a. How much in total dollars is the company behind in its payments? (Do not round intermediate calculations. Input your answer in dollars, not millions (e.g., $1,234,000).) b. The firm proposes to offer...

Enterprise storage company has $440,000 shares of cumulative preferred stock outstanding, which has a stated dividend...

Enterprise storage company has $440,000 shares of cumulative preferred stock outstanding, which has a stated dividend of $7.75. it is six years I arrears in it's dividend payments

National Health Corporation (NHC) has a cumulative preferred stock issue outstanding, which has a stated annual...

National Health Corporation (NHC) has a cumulative preferred stock issue outstanding, which has a stated annual dividend of $10 per share. The company has been losing money and has not paid preferred dividends for the last five years. There are 510,000 shares of preferred stock outstanding and 810,000 shares of common stock. a. How much is the company behind in preferred dividends? (Do not round intermediate calculations. Input your answer in dollars, not millions (e.g. $1,234,000).) Preferred dividends in...

The Barney company has outstanding stock as follows: 10% preferred stock 10,000 shares $10 par cumulative...

The Barney company has outstanding stock as follows: 10% preferred stock 10,000 shares $10 par cumulative and participating Common stock 60,000 shares $5 par The preferred stock is permitted to participate after common receives $1 per share. The participation is on a total par relationship. There are no arrears going into the first year. Prepare a dividend allocation schedule including a participation schedule showing total dollars and per share calculations assuming the following dividends are declared. Year 1 $0 Year...

Shiner, Inc. has 20,000 shares of 5%, $12 Par Cumulative Preferred stock outstanding and 68,000 shares...

Shiner, Inc. has 20,000 shares of 5%, $12 Par Cumulative Preferred stock outstanding and 68,000 shares of $1 Par Common Stock Outstanding. During 2020 & 2021, Shiner paid no dividends. In 2022 Shiner paid $26,500 in total dividends. Which of the following is correct? Multiple Choice In 2022, Preferred stockholders received $12,000 and Common stockholders received $14,500. In 2022, Preferred stockholders received $24,000 and Common stockholders received $2,500. In 2022, Preferred stockholders received $36,000 and Common stockholders received $0. In...

Pealand Company has 50,000 shares of common stock outstanding and 2,000 shares of preferred stock outstanding....

Pealand Company has 50,000 shares of common stock outstanding and 2,000 shares of preferred stock outstanding. The common stock is $1.00 par value. The preffered stock has a $100 par value, a 5% dividend rate, and is noncumulative. On October 31, 2015, the company declares dividends of $0.25 per share for common. Provide the journal entry for the declaration of dividends.

Sweet Company’s outstanding stock consists of 1,300 shares of cumulative 5% preferred stock with a $100...

Sweet Company’s outstanding stock consists of 1,300 shares of cumulative 5% preferred stock with a $100 par value and 10,300 shares of common stock with a $10 par value. During the first three years of operation, the corporation declared and paid the following total cash dividends. Dividends Declared & Paid Year 1 $ 2,300 Year 2 $ 6,300 Year 3 $ 33,500 The total amount of dividends paid to preferred and common shareholders over the three-year period is:

Sweet Company’s outstanding stock consists of 1,400 shares of cumulative 6% preferred stock with a $100...

Sweet Company’s outstanding stock consists of 1,400 shares of cumulative 6% preferred stock with a $100 par value and 10,400 shares of common stock with a $10 par value. During the first three years of operation, the corporation declared and paid the following total cash dividends. Dividend Declared year 1 $ 2,400 year 2 $ 6,400 year 3 $ 34,000 The amount of dividends paid to preferred and common shareholders in year 3 is: Multiple Choice a. $16,400 preferred; $17,600...

Sweet Company’s outstanding stock consists of 2,000 shares of cumulative 4% preferred stock with a $100...

Sweet Company’s outstanding stock consists of 2,000 shares of cumulative 4% preferred stock with a $100 par value and 12,000 shares of common stock with a $10 par value. During the first three years of operation, the corporation declared and paid the following total cash dividends. Dividends Declared & Paid Year 1 $ 4,000 Year 2 $ 8,000 Year 3 $ 42,000 The total amount of dividends paid to preferred and common shareholders over the three-year period is: Multiple Choice...

Question