Final answer:
In 2016, after paying the cumulative dividends owed to preferred shareholders, including arrears from 2014 and 2015, common shareholders will receive $18 million in dividends from MLS Enterprises.
Step-by-step explanation:
To determine the amount of dividends common shareholders will receive in 2016, we must first calculate the dividends owed to preferred shareholders. Since the preferred stock is 6% cumulative, preferred shareholders are entitled to 6% of $400 million, which equals $24 million, every year. If preferred dividends were not fully paid in the past, the unpaid dividends accumulate and must be paid out before common shareholders receive any dividends.
For 2014 and 2015, $20 million was declared each year. This means that preferred shareholders received $20 million out of their $24 million entitlement each year, leaving $4 million unpaid for each year. The total arrears are $8 million ($4 million for 2014 and $4 million for 2015). When $50 million is declared in 2016, these arrears must be paid first, leaving us with $50 million - $8 million = $42 million available for dividends in 2016.
After clearing the arrears, the preferred shareholders will still need to be paid their entitlement for 2016, which is another $24 million. Subtract this from the $42 million remaining, and we are left with $42 million - $24 million = $18 million. This is the amount that the common shareholders will receive in 2016.