Graphic Designs has 68,000 shares of cumulative preferred stock outstanding. Preferred shareholders are supposed to be paid $1.60 per quarter per share in dividends. However, the firm has encountered financial problems and has not paid any dividends for the past three quarters. How much will the firm have to pay per share of preferred next quarter if the firm also wishes to pay a common stock dividend?

a) $3.20

b) $4.80

c) $6.40

d) $7.50

e) $1.60

Question

Business

Huang

11 November, 04:42

Graphic Designs has 68,000 shares of cumulative preferred stock outstanding. Preferred shareholders are supposed to be paid $1.60 per quarter per share in dividends. However, the firm has encountered financial problems and has not paid any dividends for the past three quarters. How much will the firm have to pay per share of preferred next quarter if the firm also wishes to pay a common stock dividend?

a) $3.20

b) $4.80

c) $6.40

d) $7.50

e) $1.60

+3

Answers (1)

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Diva · Answer 1

Preffered shares are cumulative, so it has to pay for the missed quarters.

Next quarter it has to pay 4 dividends: 3 missed dividends and 1 for the current quarter.

Total dividend = 4*1.60 = $6.40

Total dividend = $6.40

Answer is C