Question

A company issues 500,000 shares of preferred stock for $30 a share. The stock has a fixed annual dividend rate of 5% and a par value of $9 per share. The current price of the preferred stock is $32 a share. Preferred stockholders can anticipate receiving a per share annual dividend of:

1) 5% of the $9 par value per share.
2) 5% of the $30 issue price per share.
3) 5% of the $32 current market price per share.
4) 5% of the $21 additional paid-in capital per share.

Answer 1

Preferred stockholders can anticipate receiving a per share annual dividend of $1.50, which is 5% of the $30 issue price per share.

Step-by-step explanation:

The preferred stockholders can anticipate receiving a per share annual dividend of 5% of the $30 issue price per share, which is option 2.

To calculate this, we multiply the issue price of $30 by the fixed annual dividend rate of 5%:

($30) x (5%) = $1.50

Therefore, the preferred stockholders can anticipate receiving a per share annual dividend of $1.50.