Question

​Wetzel, Inc. has​ 20,000 shares of cumulative preferred stock​ outstanding, with annual dividends paid at a rate of​ $2 per share.​ Wetzel, Inc. also has​ 40,000 shares of common stock outstanding. Preferred dividends are in arrears from the prior year and the number of shares remained the same for this year and last year.

If​ Wetzel, Inc. declares a​ $400,000 dividend in the current​ year, each outstanding share of common stock would​ receive: (Round your answer to the nearest​ cent.)

Answer 1

$8 per share

Step-by-step explanation:

Preferred annual dividend outstanding paid this year = 20,000 * $2 = $40,000

Preferred annual dividend outstanding for the year and paid = 20,000 * $2 = $40,000

Common stock dividend paid this year = $400,000 - $40,000 - $40,000 = $320,000

Common stock dividend per share = $320,000/40,000 = $8 per share

Therefore, each outstanding share of common stock would​ receive $8.00 per share.