Preferred Dividends Common Dividends Total Dividends Total Per Share Year Total Per Share Year 1 $ 24,000 Year 2 10,000 Year 3 126,000 Year 4 100,000 Year 5 125,000 Year 6 125,000
Dividends on preferred and common stock
Yosemite Bike Corp. manufactures mountain bikes and distributes them through
retail outlets in California, Oregon, and Washington. Yosemite Bike Corp. has declared
the following annual dividends over a six-year period ended December 31 of each
year: Year 1, $24,000; Year 2, $10,000; Year 3, $126,000; Year 4, $100,000; Year 5,
$125,000; and Year 6, 5125,000. During the entire period, the outstanding stock of the
company was composed of 25,000 shares of cumulative preferred 2% stock, $90 par,
and 100,000 shares of common stock, $4 par.
Instructions
1. Determine the total dividends and the per-share dividends declared on each
class of stock for each of the six years. There were no dividends in arrears on
January 1, Year 1. Summarize the data in tabular form, using the following
column headings:
2. Determine the average annual dividend per share for each class of stock for
the six- year period.
3. Assuming a market price of $100 for the
common stock, calculate the average annual percentage return on initial
shareholders' investment, based on the average annual dividend per share (a) for
preferred stock and (b) for common stock.
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