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Chapter 5: Q5-17-20BP-a (page 570)

Question: Enterprise Storage Company has \(440,000 shares of cumulative preferred stock outstanding, which has a stated dividend of \)7.75. It is six years in arrears in its dividend payments.

a. How much in total dollars is the company behind in its payments?

Short Answer

Expert verified

Answer

The dividend in arrears will be $20,460,000.

Step by step solution

01

Step-by-step solutionStep 1: Information provided in the question

Annual dividend to be paid = $7.75 per share

Preferred stock outstanding = $440,000

Time for which dividends have to be paid = 6 years

02

 Step 2: Calculation of dividend in arrears

The dividend in arrears will be $20,460,000.

Dividendinarrears=Annualdividendpershare×Sharesoutstanding×Timeforwhicharrearsaredue=$7.75×440,000×6=$20,460,000

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