Question

A company has outstanding 9 million shares of $2 par value common stock and 1 million shares of $4 par value preferred stock. The preferred stock has an 8% dividend rate. The company declares $600,000 in total dividends for the year. Which of the following is correct if dividends in arrears are $30,000?

A) Preferred stockholders will receive $350,000; common stockholders will receive $250,000.

B) Preferred stockholders will receive $60,000; common stockholders will receive $540,000.

C) Preferred stockholders will receive $320,000; common stockholders will receive $280,000.

D) Preferred stockholders will receive $90,000; common stockholders will receive $510,000.

Answer

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