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w1257j
Dec 17, 2009, 12:27 AM
Hi, can someone please help me with this dividends question?

A company has 10000 shares of $10 cumulative preferred shares outstanding and 50000 common shares outstanding.

There were 2 years' dividends in arrears on the preferred shares.

The company wants to give the common shareholders a $1.50
Dividend per share at the end of this fiscal year.

The total dividends to be declared by the company are..?

answer= 375000

PLEASEEEEEEEEEEE help me with this question...
I've already spent few hours on this question... and.. I keep getting the answer which is off by 100000 (275000).

Thank you:o:confused:

rehmanvohra
Dec 17, 2009, 06:12 AM
I think the question is silent about the rate of preferred dividend. If the answer is assumed to be correct, then:

Total dividends $375,000
Common dividend (50,000 x 1.50) 75,000
Balance representing preferred dividends $300,000

Now the total paid up capital of preferred shares is $100,000 (10,000 shares x $10) and the dividends in arrears are for three years - two previous years + current. That will give a dividend rate of 100%??

If there is a typo error and the par value is $100 or the number of shares are 100,000, then the rate is 10% which makes sense.

w1257j
Dec 17, 2009, 07:44 AM
I think the question is silent about the rate of preferred dividend. If the answer is assumed to be correct, then:

Total dividends $375,000
Common dividend (50,000 x 1.50) 75,000
Balance representing preferred dividends $300,000

Now the total paid up capital of preferred shares is $100,000 (10,000 shares x $10) and the dividends in arrears are for three years - two previous years + current. That will give a dividend rate of 100%?????

If there is a typo error and the par value is $100 or the number of shares are 100,000, then the rate is 10% which makes sense.

THANK YOU! I get the point now ^^
but.. I have a question abut the number of years for dividends..
from the question, I forgot to put "As of the beginning of this fiscal
year, there were 2 yrs' dividends in arrears on preferred shares"
well, doesn't that mean the dividends in arrears are for 2 years then?

THANK YOU SOOOOOO much for your help
you are my saviour! LOL ;)

w1257j
Dec 17, 2009, 08:18 AM
THANK YOU! I get the point now ^^
but.. I have a question abut the number of years for dividends..
from the question, I forgot to put "As of the beginning of this fiscal
year, there were 2 yrs' dividends in arrears on preferred shares"
well, doesn't that mean the dividends in arrears are for 2 years then?

THANK YOU SOOOOOO much for your help
you are my saviour!! LOL ;)

OPPSSS I think I misunderstood the question.. LOl SRY my bad :o don't read the one i've posted above..:(

Anyway..




I have a question. Does it not make sense if the rate of dividends is 100%? Well if it's 100%, then doesn't it give us the amount of preferred dividends of $300,000 which perfectly does make sense?

Thank you..!

rehmanvohra
Dec 17, 2009, 10:06 AM
THANK YOU! I get the point now ^^
but.. I have a question abut the number of years for dividends..
from the question, I forgot to put "As of the beginning of this fiscal
year, there were 2 yrs' dividends in arrears on preferred shares"
well, doesn't that mean the dividends in arrears are for 2 years then?

THANK YOU SOOOOOO much for your help
you are my saviour!! LOL ;)

It is clear from the question that the dividends for two years were in arrears. That makes a total of three years' dividends. As I mentioned in my post two years for the previous years and one for the current year.

w1257j
Dec 17, 2009, 10:21 AM
It is clear from the question that the dividends for two years were in arrears. That makes a total of three years' dividends. As I mentioned in my post two years for the previous years and one for the current year.

YES I know thank you ^^ you were right. I didn't look at the question carefully, ^^ I realized that after I posted the question to you n couldn't figure out how to delete it so.. yeah LOL anyway thank you!!

OHHHHH and if you see this post, will you please be able to help me
with another question I've just posted?. I'm really sorry to bother
you like this.. I won't ask you anymore after that. :o thank you very much!