A corporation has 10,000 shares of 6 percent, $50 par-value noncumulative preferred stock and 50,000 shares of $4 par-value common stock outstanding. Last year, no dividends were paid. This year, the board of directors decided to pay a dividend of $80,000. The common stockholders will receive a dividend of:

Question

Quizplus · Accepted Answer

First, the preferred stockholders are paid their dividends. With 10,000 shares at a 6% dividend rate on a $50 par value, the total preferred dividend is 10,000 * $50 * 6% = $30,000. Subtracting this from the total dividend of $80,000 leaves $50,000 for the common stockholders. With 50,000 shares of common stock, each share receives $50,000 / 50,000 = $1.00.

A Corporation Has 10,000 Shares of 6 Percent, $50 Par-Value