Question: A firm has 50 million common shares outstanding on which
A firm has 50 million common shares outstanding, on which it pays a quarterly dividend of $0.20 per share. The firm’s capital structure also includes two million cumulative preferred shares with a $25 par value that yield 8 percent per year (or 2 percent per quarter). After making some bad loans in the sub-prime mortgage market, the firm suffered a big loss, and suspended its dividend payments on all forms of equity. Six months later, the company is once again in the black having earned $6 million (after tax), which it intends to pay as dividends. How much will the common shareholders receive per share?
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