What is the average issue price of the preferred shares

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Reference no: EM132798622

Problem - The shareholders' equity section of Toulouse Corporation appears below:

$4.50 cumulative preferred shares, unlimited shares authorized, 40,000 issued and outstanding $2,000,000

Common shares, unlimited shares authorized, no par value, 400,000 shares issued and outstanding 3,000,000

Contributed capital 5,000,000

Retained earnings 2,500,000

Total shareholders' equity $7,500,000

Required -

a. What is the average issue price of the preferred shares?

b. What is the average issue price of the common shares?

c. What is the total amount of the annual dividends paid to preferred shareholders?

d. If the company paid a total dividend of $500,000, how much would go to the common shareholders?

e. What is the market price of each common share?

f. Why would an investor buy preferred shares of this company?

g. Why would an investor buy common shares of this company?

h. This company has more contributed capital than retained earnings. Is this situation desirable? Discuss.

Reference no: EM132798622

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