Question

Parsons, Inc., is a publicly owned company. The following information is excerpted from a recent balance sheet. Dollar amounts (except for per share amounts) are stated in thousands.
Stockholders’ equity:
Convertible $17.20 preferred stock, $250 par value, 1,000,000 shares authorized; 345,000 shares
issued and outstanding . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . . . . . . . . . . . $ 86,250
Common stock, par value $0.50; 25,000,000 shares authorized . . . . . . . . . . . . . . . . 6,819
Additional paid-in capital . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . . . . . . . . . . . . . . 87,260
Retained earnings. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57,263
Total stockholders’ equity . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . . . . . . . . . . . . $237,592

Instructions
From this information, answer the following questions:
a. How many shares of common stock have been issued?
b. What is the total amount of the annual dividends paid to preferred stockholders?
c. What is the total amount of paid-in capital?
d. What is the book value per share of common stock?
e. Briefly explain the advantages and disadvantages to Parsons of being publicly owned rather than operating as a closely held corporation.
f. What is meant by the term convertible used in the caption of the preferred stock? Is there any more information that investors need to know to evaluate this conversion feature?
g. Assume that the preferred stock currently is selling at $248 per share. Does this provide a higher or lower dividend yield than an 8 percent, $50 par value preferred with a market price of $57 per share? Show computations (round to the nearest tenth of 1 percent). Explain why one preferred stock might yield less than another.



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  • CreatedApril 17, 2014
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