Solution-What does your analysis indicate about the firms

What does your analysis indicate about the firms capacity

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Reference no: EM131312507

You are considering purchasing the preferred stock of a firm but you're also concerned about its capacity to pay the dividend.

To help you feel more confident, you compute the times-preferred-dividend-earned ratio for the last three years from the following data taken from the firm's financial statements.

Year	20x1	20x2	20x3
Operating Income	$12,000,000	$15,000,000	$17,000,000
Interest	3,000,000	5,900,000	11,000,000
Taxes	4,000,000	5,400,000	4,000,000
Preferred Dividends	1,000,000	1,000,000	1,500,000
Common Dividends	3,000,000	2,000,000

What does your analysis indicate about the firm's capacity to pay preferred stock dividends? Hint...this will require you to compute net earnings.

Reference no: EM131312507

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What does your analysis indicate about the firms capacity

Reference no: EM131312507

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