Figurate Industries has 750 000 shares of cumulative preferred stock outstanding. It has passed the

QUESTION

Figurate Industries has 750,000 shares of cumulative preferred stock outstanding. It has passed the last three quarterly dividends of $2.50 per share and now (at the end of the current quarter) wishes to distribute a total of $12 million to its shareholders. If Figurate has 3 million shares of common stock outstanding, how large a per-share common stock dividend will it be able to pay?
Since its cumulative preferred stock therefore before paying any dividend to equity holders, preferred stock dividend must be paid for all its backlog. Accordingly Common stock dividend = Total distribution (No of preferred stock * Quarterly dividend * No of

arters) / No of common stock = (12000000 (750000 * 2.50 * 4)) / 3000000 = 1.50 per share The above disposal would be after the distribution to the Preference Shares Dividend.

ANSWER:

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