Question

Texas Inc. has 10,000 shares of 6%, $125 par value cumulative preferred stock and 50,000 shares of $1 par value common stock outstanding at December 31. What is the annual dividend on the preferred stock?

a. $60 per share
b. $75,000 in total
c. $10,000 in total
d. $0.75 per share

Answer 1

The annual dividend on Texas Inc.'s 10,000 shares of 6%, $125 par value cumulative preferred stock is $75,000 in total.

Step-by-step explanation:

The annual dividend on Texas Inc.'s preferred stock is calculated by finding the fixed percentage dividend applied to the par value of the preferred stock. With a 6% dividend rate on a $125 par value, each share receives $7.50 annually (0.06 × $125). Therefore, for 10,000 shares, the total annual dividend on the preferred stock would be $75,000 (10,000 × $7.50).