Question

A company had stock outstanding as follows during each of its first 3 years of operations: 2,000 shares of 8%, $100 par, cumulative preferred stock and 57,000 shares of $10 par common stock. The amounts distributed as dividends are presented in the following schedule.

Answer 1

The question discusses business concepts involving stock dividends and valuations, focusing on historical returns from dividends and capital gains as well as a hypothetical company's scenario on shareholder profits through dividends.

Step-by-step explanation:

The question related to dividends and stock valuations pertains to the field of business or finance. When a company, such as Babble, Inc., in our example, decides to distribute profits as dividends, it directly affects the shareholders' returns. Each share owned entitles the shareholder to a portion of those profits.

In the context of historical dividends, Table 17.2 highlights how the rate of dividends has declined from around 4% in the 1950s to the 1980s to about 1% to 2% since the 1990s, with a notable shift towards higher capital gains compared to dividends in later decades. For Babble, Inc., the determination of what an investor would pay for a share of stock considers the present and future dividends, which requires calculating the present value of these expected dividends.