Shares of cumulative preferred stock outstanding

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Reference no: EM131188753

Enterprise storage company has 530000 shares of cumulative preferred stock outstanding which has a stated dividend of 6.75. It is six years in arrears in it's dividend payments. Use appendix b for an approximate answer but calculate your final answer using the formula and financial calculator methods. A. How much in total dollars is the company behind in it's payments? B. The firm proposes to offer new common stock to the preferred stockholders to wipe out the deficit. The common stock will pay the following dividends over the next four years D1 1.60 D2 1.70 D3 1.80 D4 1.90 The company anticipates earnings per share after four years will be 4.18 with a pe ratio of 13. The common stock will be valued as the present value of future dividends plus the present value of the future stock price after four years. The discount grate used by the investment banker is 14 percent. Compute the value of the common stock. How many shares of common stock must be issued at the value computed in part b to eliminate the deficit (arrrearage) computed in part a. Round your answer to the nearest whole share.

Reference no: EM131188753

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