Question

Problem 4

The Mark Company has $250,000 to pay dividends. The company has 25,000 shares of 8%, $50 par, preferred stock and 100,000 shares of $5 par common stock outstanding. The common stock is currently selling for $43 per share and the preferred stock is selling for $95 per share on the stock market.

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Determine the amount of dividends to be paid for each class of stock in each of the independent situations.

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1) Preferred stock is nonparticipating and cumulative; dividends are in the arrears for 1 year at the beginning of the year.

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2) Preferred stock is fully participating and cumulative.

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3) Preferred stock is nonparticipating and noncumulative.

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4) Compute the dividend yield on the preferred stock and common stock for number 3.

Situation	Dividends to Preferred Stockholders	Dividends to Common Stockholders
1)
2)
3)
4)

Answer 1