Question

Industrial Products has both common and noncumulative preferred stock outstanding. The dividends on these stocks are $1.10 per quarter per share of common and $2.25 per quarter per share of preferred. The company has not paid any dividends for the past two quarters but is expected to pay dividends on both the common and the preferred stock next quarter. What is the minimum amount the firm must pay per share to its preferred stockholders next quarter if it plans to pay a common dividend?

Answer 1

The minimum amount the firm must pay per share to its preferred stockholders next quarter is $2.25.

Step-by-step explanation:

To determine the minimum amount the firm must pay per share to its preferred stockholders next quarter, we need to consider both the common and preferred dividends. The common dividend is $1.10 per quarter per share of common stock, and the preferred dividend is $2.25 per quarter per share of preferred stock. Since the question mentions that the company plans to pay a common dividend, we can assume that the minimum amount the firm must pay per share to its preferred stockholders next quarter is equal to the preferred dividend of $2.25.