Reference no: EM131820560

Question - Bridger Bike Corp. manufactures mountain bikes and distributes them through retail outlets in Montana, Idaho, Oregon, and Washington. Bridger Bike Corp. has declared the following annual dividends over a six-year period ending December 31 of each year: 2005, $5,000; 2006, $18,000; 2007, $45,000; 2008, $45,000; 2009, $60,000; and 2010, $67,000. During the entire period, the outstanding stock of the company was composed of 10,000 shares of 4% preferred stock, $50 par, and 25,000 shares of common stock, $1 par.

Instructions

1. Determine the total dividends and the per-share dividends declared on each class of stock for each of the six years. Summarize the data in tabular form, using the following column headings:

Year Total Dividends Preferred Dividends Common Dividends Total Per Share Total Per Share

2005 $ 5,000

2006 18,000

2007 45,000

2008 45,000

2009 60,000

2010 67,000

2. Calculate the average annual dividend per share for each class of stock for the six-year period. Round to the nearest cent.

3. Assuming that the preferred stock was sold at $86 and common stock was sold at $22.75 at the beginning of the six-year period, calculate the average annual percentage return on initial shareholders' investment, based on the average annual dividend per share (a) for preferred stock and (b) for common stock.