Colter Corporation suspended dividend payments on all four classes of capital stock outstanding because of a downturn
Question:
You own 100 shares of the 5%, noncumulative, convertible preferred stock and have been considering converting those 100 shares to common stock at the existing conversion rate of 3 to 1 (3 shares of common for 1 share of preferred). The rate is scheduled to drop to 2 to 1 at the end of 2008. Because the price of common stock has been rising rapidly, you are trying to decide between retaining your preferred stock or converting to common stock before the price goes higher and the ratio is lowered.
Assuming there is no conversion of preferred stock, how much cash does Colter need to pay the proposed dividend? What are the merits of converting your stock at this time as opposed to waiting until after the dividend is paid and the conversion ratio decreases? Explain the issues involved.
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... Corporation
A Corporation is a legal form of business that is separate from its owner. In other words, a corporation is a business or organization formed by a group of people, and its right and liabilities separate from those of the individuals involved. It may... 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...
Fantastic news! We've Found the answer you've been seeking!
Step by Step Answer:
Related Book For
Intermediate Accounting
ISBN: 978-0324312140
16th Edition
Authors: James D. Stice, Earl K. Stice, Fred Skousen
Question Posted: