Question

The board of directors of Midwest Foods has declared a dividend of $3,500,000. The company has 300,000 shares of preferred stock that pay $2.85 per share and 2,500,000 shares of common stock. After finding the amount of dividends due the preferred shareholders, calculate the dividend per share of common stock.

Answer 1

1. $855,000
2. Dividend per share of common stock = $1.06

Explanation:

1. Preferred Share dividends.

There are 300,000 preference shares and each of them got $2.85. Total dividends are;

= 300,000 * 2.85

= $855,000‬

2. Total dividends = $3,500,000

Dividends left for Common Shareholders (preference gets paid first)

= 3,500,000 - 855,000

= $2,645,000

Common shares number 2,500,000

Dividend per share of common stock =
`(2,645,000)/(2,500,000)`

= $1.06