The shareholders' equity of MLS Enterprises includes $200 million of no par common stock and $400 million of 6% cumulative preferred stock. The board of directors of MLS declared cash dividends of $50 million in 2021 after paying $20 million cash dividends in both 2020 and 2019. What is the amount of dividends common shareholders will receive in 2021? (Enter your answers in millions (i. e., 10,000,000 should be entered as 10).)

Solution and Explanation:

Calculating the annual preferred dividend

($ in million)

Par value Dividend rate Annual

preferred stock preferred dividend

Annual preferred dividend $300 6 percent $18

Calcuate the amount of dividend to common shareholders will receive in the year

($ in million)

Total cash Paid to preferred Paid to common Dividend in

dividend paid arrears at year end

2014 $14 $14 0 $4

2015 $14 $14 0 $8

2016 $41 $26 ($8 plus $18) $15 ($41 minus $26) Nil

Total $69 $54 $15 $8