A corporation has 4,000 shares of 5 percent,$100 par-value preferred stock and 50,000 shares of $2 par-value common stock outstanding.If the board of the directors decides to distribute dividends totaling $100,000,the common stockholders will receive a dividend of

Question

Quizplus · Accepted Answer

First, we need to figure out how much of the $100,000 will go towards the preferred stockholders. The preferred stock has a 5% dividend, so they will receive $200 per share ($100 par value * 0.05 dividend rate). There are 4,000 shares, so the total amount going to the preferred stockholders is $800,000 ($200 per share * 4,000 shares).

Now we can figure out how much is left for the common stockholders. Subtracting the amount going to the preferred stockholders from the total dividend amount gives us $99,200 ($100,000 - $800).

To determine the per-share dividend for the common stockholders, we divide the total amount by the number of shares:

$99,200 ÷ 50,000 shares = $1.984

Rounding to the nearest cent, the dividend per share for the common stockholders is $1.98, or $1.60 per share ($1.984 rounded down to the nearest cent). Therefore, the correct answer is B.

A Corporation Has 4,000 Shares of 5 Percent,$100 Par-Value Preferred