Question

Dividends Per Share

Lightfoot Inc., a software development firm, has stock outstanding as follows: 30,000 shares of cumulative preferred 3% stock, $25 par, and 38,000 shares of $75 par common. During its first four years of operations, the following amounts were distributed as dividends: first year, $8,700; second year, $14,100; third year, $79,280; fourth year, $139,920.

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 (dividend per share)	$	$	$	$
Common stock (dividend per share)	$	$	$	$

Answer 1

	1st Year	2nd Year	3rd Year	4th Year
Preferred stock (dividend per share)	0.29	0.47	1.49	0.75
Common stock (dividend per share)	0	0	0.91	3.09

Workings:
Annual Preferred dividends	22500	=30000*25*3%
1st Year:
Preferred stock (dividend per share)	0.29	=8700/30000
Arrear dividend	13800	=22500-8700
2nd Year:
Preferred stock (dividend per share)	0.47	=14100/30000
Arrear dividend	22200	=13800+(22500-14100)
3rd Year:
Preferred stock (dividend per share)	1.49	=(22200+22500)/30000
Common stock (dividend per share)	0.91	=(79280-44700)/38000
4th Year:
Preferred stock (dividend per share)	0.75	=22500/30000
Common stock (dividend per share)	3.09	=(139920-22500)/38000