Uphoff Company has $80,000 available to pay dividends. It has 2,000 shares of 10%, $100 par, preferred stock and 30,000 shares of $10 par common stock outstanding. The preferred stock is selling for $125 per share and the common stock is selling for $20 per share.
1. Determine the amount of dividends to be paid to each class of stockholder for each of the following independent assumptions:
a. Preferred stock is nonparticipating and noncumulative.
b. Preferred stock is nonparticipating and cumulative. Preferred dividends are two years in arrears at the beginning of the year.
c. Preferred stock is fully participating and cumulative. Preferred dividends are one year in arrears at the beginning of the year.
d. Preferred stock is participating up to a maximum of 15% of its par value and is noncumulative.
2. For 1(a), compute the dividend yield on the preferred stock and the common stock.