Question

Seventy-Two Inc., a developer of radiology equipment, has stock outstanding as follows: 60,000 shares of cumulative preferred 3% stock, $20 par, and 405,000 shares of $25 par common.

During its first four years of operations, the following amounts were distributed as dividends: first year, $30,000; second year, $74,000; third year, $100,000; fourth year, $100,000.

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 "0.00".

	1st Year	2nd Year	3rd Year	4th Year
Preferred stock (dividends per share)	$	$	$	$
Common stock (dividends per share)	$	$	$	$

Answer 1

Dividend to preferred stock is given before any dividend is paid on common shares

Also, fixed amount of dividend is paid on preferred stock, rest all belongs to equity

Max. Dividend on preferred stock = 60,000*20*3% = $36,000

Max. Dividend per share = 36,000/60000 = $0.6

	1st Year	2nd Year	3rd Year	4th Year
Preferred stock (dividends per share)	30,000/60,000 = $0.5	$0.6	$0.6	$0.6
Common stock (dividends per share)	$0.00	(74000-36000)/405,000 = $0.09	$0.16	$0.16