A company issues 500,000 shares of preferred stock for $30 a share. The stock has a fixed annual dividend rate of 5% and a par value of $9 per share. The current price of the preferred stock is $32 a share. Preferred stockholders can anticipate receiving a per share annual dividend of:
A) 5% of the $9 par value per share.
B) 5% of the $30 issue price per share.
C) 5% of the $32 current market price per share.
D) 5% of the $21 additional paid-in capital per share.

Question

Quizplus · Accepted Answer

Preferred stockholders receive dividends based on the par value of the stock, not the issue price, market price, or additional paid-in capital. Therefore, they will receive 5% of the $9 par value per share.

A Company Issues 500,000 Shares of Preferred Stock for $30