Question

Aero Manufacturing Corporation has 6,240 shares of cumulative, 5.75%, $75 par value preferred stock outstanding, and 45,380 shares of common stock with a par value of $5.00 per share. (When working with currency, round to two decimal places immediately) Last year, the company failed to pay a dividend, but the board of directors would like to resume paying regular dividends this year; the Preferred Stock dividend was in arrears last year. The board has determined that $65,000 cash will be paid to preferred and common stockholders this year. This is a continuation of the previous question. B) Calculate the dividend per share: (1) preferred and (2) common stockholders.

Answer 1

The dividend per share for Aero Manufacturing Corporation's preferred stockholders is $4.31, and for the common stockholders is $0.92.

Step-by-step explanation:

To calculate the dividend per share for Aero Manufacturing Corporation, we need to consider both the preferred and common stockholders.

(1) For the preferred stockholders:

The preferred stock has a cumulative dividend of 5.75% and a par value of $75 per share. We can calculate the annual dividend per share by multiplying the par value by the dividend rate: $75 x 5.75% = $4.31.

(2) For the common stockholders:

The total cash to be paid to preferred and common stockholders is $65,000. The preferred stockholders will receive $4.31 per share, so the remaining amount will be paid to the common stockholders. To calculate the dividend per share for common stockholders, subtract the amount paid to preferred stockholders from the total cash, and divide the result by the number of common shares: ($65,000 - ($4.31 x 6,240)) / 45,380 = $0.92.

Therefore, the dividend per share for the preferred stockholders is $4.31, and for the common stockholders is $0.92.