Question

Book Show Me How Calculator Print Item 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 has declared the following annual dividends over a six-year period ended December 31 of each year: 2041, $24,250; 20Y2, $10,750; 20Y3, $117,500; 20Y4, $92,500; 2045, $112,500; and 2016, $137,500. During the entire period, the outstanding stock of the company was composed of 25,000 shares of cumulative preferred 2% stock, $85 par, and 100,000 shares of common stock, 54 par. Required: 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 at the beginning of 2011. Summarize the data in tabular form. If required, round your answers to two decimal places. If the amount is zero, please enter "0". Preferred Dividends Common Dividends Total Year Dividends Total Per Share Total 20Y1 $24,250 2072 10,750 203 117,500 2014 92,500 2045 112,500 20Y6 137,500 2. Determine the average annual dividend per share for each class of stock for the six-year period. Round your answers to two decimal places Average annual dividend for preferred stock per share Average annual dividend for common stock per share 3. Assuming a market price of $100 for the preferred stock and 55 for the common stock, determine 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. Round your answers to two decimal places Check My Work Next >

Answer 1

Solution 1 & 2:

Computation of dividend per share to Preferred and common shareholders
Year	Total Dividends (A)	Preferred dividend per year (B)	Preferred dividend paid ( C )	Preferred dividend in arrear (D) (B - C)	Preferred dividend per share (C/25000)	Common dividend paid ( E )(A - C)	Common dividend per share (E/100000)
1	$24,250.00	$42,500.00	$24,250.00	$18,250.00	$0.97	$0.00	$0.00
2	$10,750.00	$42,500.00	$10,750.00	$50,000.00	$0.43	$0.00	$0.00
3	$117,500.00	$42,500.00	$92,500.00	$0.00	$3.70	$25,000.00	$0.25
4	$92,500.00	$42,500.00	$42,500.00	$0.00	$1.70	$50,000.00	$0.50
5	$112,500.00	$42,500.00	$42,500.00	$0.00	$1.70	$70,000.00	$0.70
6	$137,500.00	$42,500.00	$42,500.00	$0.00	$1.70	$95,000.00	$0.95
Average					$1.70		$0.40

Solution 3:

Annual percentage return on preferred stock = Average annual dividend per share / Market price per share

= $1.70 / $100 = 1.7%

Annual percentage return on common stock = $0.40 / $5 = 8%