[llobran]

What is the return on investment in the problem below for common and preferred stock? How did you get that solution?

Robert's Rollerblade Company had stock outstanding as follows during each of
its first five years of operations

2,000 shares of 10%, $100 par, preferred stock
10,000 shares of $10 par value common stock



The amounts declared as dividends are presented below. Determine the total and per
share dividends for each class of stock for each year by completing the schedule.



Preferred Dividends Common Dividends
Total
Year Dividends Total Per Share Total Per Share
1 $20,000 $20,000.00 $10.00 $- $-
2 $23,000 $20,000.00 $10.00 $3,000.00 $0.30
3 $26,000 $20,000.00 $10.00 $6,000.00 $0.60
4 $29,000 $20,000.00 $10.00 $9,000.00 $0.90
5 $32,000 $20,000.00 $10.00 $12,000.00 $1.20
Total $50.00 $3.00


PART 2

Calculate the average annual dividend per share for each class of stock for the five-year period.

Average annual dividend for preferred $10.00
$0.60
Average annual dividend for common

PART 3

Assuming that the preferred stock was sold at par and common stock was sold at $20 at the beginning of the
five year period, calculate the average annual percentage return on initial shareholders' investment, based on the
average annual dividend per share for the preferred stock and the common stock.


Return on initial investment - preferred

Return on initial investment - common

[jallbasha]

3%