Andrews Company has $80,000 available to pay dividends. It has 2,000 shares of 10%, $100 par, preferred

Question:

Andrews Company has $80,000 available to pay dividends. It has 2,000 shares of 10%, $100 par, preferred stock and 30,000 shares of $10 par common stock outstanding. The preferred stock is selling for $125 per share, and the common stock is selling for $20 per share.

Required:

1. Determine the amount of dividends to be paid to each class of shareholder for each of the following independent assumptions:

a. Preferred stock is nonparticipating and noncumulative.

b. Preferred stock is nonparticipating and cumulative. Preferred dividends are 2 years in arrears at the beginning of the year.

c. Preferred stock is fully participating and cumulative. Preferred dividends are 1 year in arrears at the beginning of the year.

2. For 1(a), compute the dividend yield on the preferred stock and the common stock.

Common Stock
Common stock is an equity component that represents the worth of stock owned by the shareholders of the company. The common stock represents the par value of the shares outstanding at a balance sheet date. Public companies can trade their stocks on... Dividend
A dividend is a distribution of a portion of company’s earnings, decided and managed by the company’s board of directors, and paid to the shareholders. Dividends are given on the shares. It is a token reward paid to the shareholders for their...