Question

Aztec Corporation has 562,500 shares of common stock and 200,000 shares of cumulative preferred stock. The annual dividend of the preferred stock is $2 per share. The only dividends paid last year were to preferred stockholders in the amount of $1 per share. This year the board of directors decided to distribute $ 1,275,000 in dividends. If you own 150 shares of common stock, what is the amount of your annual dividend?​

Answer 1

To calculate the annual dividend as a common stockholder of Aztec Corporation, subtract the dividends paid to preferred stockholders from the total dividends and divide the remaining amount by the total number of common stock shares. Your annual dividend would be approximately $232.50.

Step-by-step explanation:

To calculate the amount of your annual dividend, you need to determine the total dividends paid by Aztec Corporation and the proportion of those dividends that you are entitled to as a common stockholder.

From the information given, we know that the total dividends for this year are $1,275,000. However, only preferred stockholders received dividends last year, so in order to calculate the dividends to common stockholders, we need to subtract the dividends paid to preferred stockholders.

First, we calculate the dividends paid to preferred stockholders: 200,000 shares x $2 = $400,000.

Then, we subtract this amount from the total dividends: $1,275,000 - $400,000 = $875,000.

To determine the amount of your dividend as a common stockholder, we need to divide the remaining dividends by the total number of common stock shares. In this case, the total number of common stock shares is 562,500.

Dividing $875,000 by 562,500 shares results in an annual dividend of approximately $1.55 per share.

As you own 150 shares of common stock, your annual dividend would be 150 shares x $1.55 = $232.50.