Answer to Question #8920 in Economics of Enterprise for Dan

Question #8920
Assume the following capital structure: Preffered stock: 6%, $50 par value, 1,000 shares issued and outstanding with dividends in arrears for three prior years (2007-2009) Common Stock: $100 par value, 2,000 shares issued and outstanding. Total Dividends declared and paid in 2010 were $50,000. How much of the 2010 dividend will be paid to the common stockholders assuming the preferred stock is cumulative? A. $12,000 B. $50,000 C. $47,000 D. $38,000
Expert's answer
C. $47,000

If preffered stock is 6% than 94% goes to Common stock. 94%*$50,000=$47,000

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