Question

20.

20 Ozark Distributing Company is primarily engaged in the wholesale distribution of consumer products in the Ozark Mountain regions The following disclosure note appeared in the company's 2018 annual report . 0.35 points Note 5. Convertible Preferred Stock (in part) The Company has the following Convertible Preferred Stock outstanding as of September 2018: Date of issuance: Optionally redeemable beginning: Par value (gross proceeds): Number of shares: Liquidation preference per share: Conversion price per share: Number of common shares in which to be converted Dividend rate: June 17, 2015 June 18, 2017 $1,200,eee 120,000 1e 13.26 90,497 6. 698% The Preferred Stock is convertible at any time by the holders into a number of shares of Ozark's common stockeauatt。thenumberof preferred shares being converted times a fraction equal to $10 divided by the conversion price. The conversion prices for the Preferred Stock are subject to customary adjustments in the event of stock splits, stock dividends and certain other distributions on the Common Stock. Cumulative dividends for the Preferred Stock are payable in arrears, when, as and if declared by the Board of Directors, on March 31, June 30. September 30, and December 31 of each year The Preferred Stock is optionally redeemable by the Company beginning on various dates, as listed above, at redemption prices equal to 110% of the liquidation preference. The redemption prices decrease 2% annually thereafter until the redemption price equals the liquidation preference after which date it remains the liquidation preference Required: 1. What amount of dividends is paid annually to a preferred shareholder owning 150 shares of the Series A preferred stock? Mc Graw くFrey 20 of 40 lll Next >

Answer 1

1) What amount of dividends is paid annually to a preferred shareholder owning 150 shares of the Series A preferred stock? (Round "Dividend Rate" to 3 decimal places.)
Par Value Preferred Shares	Dividend Rate	Total Annual Preferred Dividend	Number of Preferred Shares	Dividend per preferred share	Shares owned	Annual preferred dividend 150 shares
$                                                                 12,00,000.00	6.69%	80280	120000	$       0.669	150	$     100.35
2) If dividends are not paid in 2019 and 2020, but are paid in 2019, what amount of dividends will the shareholder receive? (Round your answer to 3 decimal places.)
Amount of Dividends	$     301.05
If dividends are not paid in 2019 and 2020, but are paid in 2021, the shareholder will receive $00.35 x 3 = 301.05
3) If the investor chooses to convert the shares in 2019, how many shares of common stock will the investor receive for his/her 150 shares? (Round your answers to 2 decimal places.)
Number of convertible preferred shares owned	Conversion Factor	Number of common shares received
150	10/13.26	113.12
If the investor chooses to convert the shares in 2019, the investor will receive $10 ÷ $13.26 x 150 shares = 113.12 shares of common stock for his/her 150 shares
4) If Ozark chooses to redeem the shares on June 18, 2019, what amount will the investor be paid for his/her 150 shares? (Round "Per Share Amounts" to 2 decimal places except percentage values.)
	Per Share Amounts	Total 150 shares
Liquidation preference	$       10.00	$   1,500.00
Redemption Percentage	110%	110%
Redemption price, June 18, 2017	$       11.00	$   1,650.00
Percent Reduction in Redemption Price	4%	4%
Redemption price June 18,2019	$       10.56	$   1,584.00
	Per Share Amounts	Total 150 shares
Liquidation preference	$       10.00
Redemption Percentage (110% x (1 -4%)	106%
Redemption price June 18,2019	$       10.56	$   1,584.00
The redemption price is $11 ($10 x 110%), reduced by 4% because redemption would be two years after the initial redemption date. Hence, the price would be $11 x 96% = $10.56 The total payment would be $10.56 x 150 shares or $1584