Kingbird Inc. has 16,000 shares of 8%, $100 par value, cumulative preferred stock and 80,000...

Question:

Kingbird Inc. has 16,000 shares of 8%, $100 par value, cumulative preferred stock and 80,000 shares of $1 par value common stock outstanding at December 31, 2017. What is the annual dividend on the preferred stock?

a) $80 per share

b) $128,000 in total

c) $8,000 in total

d) $0.08 per share

Preferred Dividend

The total dividend is declared by the company management and then out of this, the share of preferred shareholders is given to them. The preferred dividend is provided based on the fixed dividend rate of the preferred shareholders. This fixed rate is paid on the face value of the shares and not the market value. The preferred stocks have a preference in the case of dividends over the common stockholders.

Answer and Explanation:


The correct answer is option b) $128,000 in total

Explanation

Annual Dividend of Preferred Stock = No. of preferred share * Face value * Dividend rate

Here,

  • No. of preferred share = 16,000 share
  • Face value = $100
  • Dividend rate = 8%

So,

Annual Dividend of Preferred Stock = 16,000 share * $100 * 8% = $128,000

The correct answer is option b)


Learn more about this topic:

Loading...
Cash Dividends & Dividend Payment

from Finance 101: Principles of Finance

Chapter 16 / Lesson 1
4.4K

Related to this Question

Explore our homework questions and answers library