Question

. Micro Office Products has issued 5,000 shares of cumulative preferred stock that will earn dividends at $2.38 per share; it has also issued 12,000 shares of common stock. $110,000 is available for dividends. What is the dividend per share of common stock?

Answer 1

$8.18

Explanation:

CPS (c. pref. stock shares): 5,000 * $2.38 = $11,900

CS (common stock): 12,000

$110,000 - $11,900 = $98,100

$98,100 / 12,000 = $8.175, or $8.18 rounded up to nearest cent

Answer 2

110000 is the total dividends of both preferred stock and common stock
So we need to find the dividend per share common stock

First find the total dividends of preferred stock
5,000×2.38=11,900


Subtract the total dividends of preferred stock for the total dividends to find the total dividends of common stock
110,000−11,900=98,100

Finally divide the total dividends of common stock by the number of common stock to find the dividend per share of common stock
98,100÷12,000=8.175....answer

Hope it helps!