Question

Consider the following scenario: Company XYZ has issued 120,000 shares of common stock, 10,000 of which are treasury stock. The company has also issued 5,000 shares of 6%, $50 par, preferred stock. If the company has declared $75,000 in dividends, how much in dividends per share will common stockholders receive? (Round answer two decimal places)

Answer 1

$0.54 per share

Step-by-step explanation:

For computing the dividend per share, first we have to determine the dividend amount which is shown below:

For Preferred stock:

= Number of shares × par value per share × dividend rate

=5,000 shares × $50 × 6%

= $15,000

Out of $75,000, the $15,000 will be paid to preference stockholders and the remaining $60,000 will be paid to equity stockholders

Now the dividend per share for common stockholders would be

Dividend per share = (Total dividend) ÷ (number of shares)

= ($60,000) ÷ (110,000 shares)

= $0.54 per share

The number of shares is computed below:

= Total number of shares - treasury stock shares

= 120,000 shares - 10,000 shares

= 110,000 shares