Dither Limited has an issued share capital of £1,450,000. Share capital consists of 800,000 preference shares of 50 pence each and £1,050,000 of ordinary share capital made up of 25 pence shares. During the financial year ended 30 November 2021, Dither Limited paid total dividends of £335,000. 7.50 pence dividend per ordinary share was paid during the year. What is the dividend rate on the preference shares?

Question

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First, calculate the total number of ordinary shares: £1,050,000 / £0.25 = 4,200,000 shares. The total dividend paid on ordinary shares is 7.50 pence per share, so total ordinary dividends = 4,200,000 shares * £0.075 = £315,000. Total dividends paid were £335,000, so preference share dividends = £335,000 - £315,000 = £20,000. Preference shares have a total nominal value of 800,000 shares * £0.50 = £400,000. The dividend rate on preference shares = (£20,000 / £400,000) * 100 = 5.00%.

Dither Limited Has an Issued Share Capital of £1,450,000