DLT has cumulative preferred stock outstanding that calls for quarterly dividend payments of $1.50 each.Due to its financial situation,the firm has not paid these preferred dividends for the past two quarters.What amount per share must be paid to the preferred shareholders this quarter if the firm also wants to pay a dividend on its common stock?
A)$1.50
B)$3.00
C)$4.50
D)$6.00
E)$7.50

Question

Quizplus · Accepted Answer

Since the preferred dividends for the past two quarters have not been paid, the total amount owed to the preferred shareholders is:

$1.50 * 2 = $3.00 per share

Now, if the firm wants to pay a dividend on its common stock as well, that dividend should be paid after the preferred dividends are paid. Therefore, the total dividend per share that needs to be paid this quarter is:

$3.00 (for the past two quarters' unpaid dividends) + $1.50 (for this quarter's dividend) = $4.50

Hence, the best choice is C) $4.50.

DLT Has Cumulative Preferred Stock Outstanding That Calls for Quarterly