Question

Preferred dividends   Acura Labs Inc. has an outstanding issue of preferred stock with a par value of ​$6060 and an 2020​% annual dividend. a.  What is the annual dollar​ dividend? If it is paid​ quarterly, how much will be paid each​ quarter?   b.  If the preferred stock is noncumulative and the board of directors has passed the preferred dividend for the last 44 ​quarters, how much must be paid to preferred stockholders in the current quarter before dividends are paid to common​ stockholders? c.  If the preferred stock is cumulative and the board of directors has passed the preferred dividend for the last 44 ​quarters, how much must be paid to preferred stockholders in the current quarter before dividends are paid to common​ stockholders?

Answer 1

Note: The numbers appears to be written twice, hence I am considering the below figures for calculation

a) Given
Par value = $60
% of annual dividend = 20%
Annual dollar dividend = % of annual dividend * Par value
                                    = 20% * 60
                                    = $12

Annual dividend is $12

If its is paid quarterly then every quarter dividend due would be = 12/4 = $3

b) If the preferred stock is non-cumulative then it means that all the dividends have been paid to the preferred stock holders and nothing is due. Thus, the amount to be paid this quarter would be $3.

c) If the preferred stock is cumulative then it means that the dividends for last 4 quarters have yet not been paid to the preferred stock holders and is due. Thus, the amount to be paid this quarter would be $3*4 = $12.

Note: I am considering that the dividend is due for last 4 quarter,

For last 44 quarters it would be 44*3 = $132