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ABC Company has outstanding 6% cumulative preferred stock. Two years ago, ABC paid a 6% preferred dividend. Last year, ABC paid a 4% preferred stock dividend. This year, ABC wishes to pay a common dividend. The preferred shareholders must receive_____________.

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jepessoa

Answer:

2% dividend for last year and a 6% dividend for this year = 8%

Explanation:

Since the preferred stock yield cumulative interests, the corporation must pay all unpaid dividends plus current dividends before it can distribute dividends to common stockholders. Preferred stock dividends are always paid before common stock dividends.

Since last year the corporation only paid a 4% preferred dividend, the remaining 2% must be added to the current 6% preferred dividend for a total of 8%.

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