Yukon bike corp manufactures mountain bikes and distributes

Reference no: EM13586981

Yukon Bike Corp. manufactures mountain bikes and distributes them through retail outlets in Canada, Montana, Idaho, Oregon, and Washington. Yukon Bike Corp. has declared the following annual dividends over a six-year period ending December 31 of each year: 2008, $28,000; 2009, $44,000; 2010, $48,000; 2011, $60,000; 2012, $76,000; and 2013, $140,000. During the entire period, the outstanding stock of the company was composed of 40,000 shares of 2% preferred stock, $65 par, and 50,000 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

2008 $ 28,000
2009 44,000
2010 48,000
2011 60,000
2012 76,000
2013 140,000

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

3. Assuming that the preferred stock was sold at $57.50 and common stock was sold at $5.00 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.

Three different plans for financing a $5,000,000 corporation are under consideration by its organizers. Under each of the following plans, the securities will be issued at their par or face amount, and the income tax rate is estimated at 40% of income.

Preferred 4% stock, $100 par - $2,500,000 1,250,000
Common stock, $5 par $5,000,000 2,500,000 1,250,000
Total $5,000,000 $5,000,000 $5,000,000

Instructions

1. Deterrmine for each plan the earnings per share of common stock, assuming that the income before bond interest and income tax is $1,000,000.

2. Determine for each plan the earnings per share of common stock, assuming that the income before bond interest and income tax is $300,000.

3. Discuss the advantages and disadvantages of each plan.

Reference no: EM13586981

Questions Cloud

A weight lifter puts an x-pound weight on each side of a : a weight lifter puts an x-pound weight on each side of a bar. a weight 5 pounds heavier than the first is then added to

Chesapeake sailmakers uses job order costing manufacturing : chesapeake sailmakers uses job order costing. manufacturing overhead is charged to individual jobs through the use of a

If fixed expenses increase by 10200 next year what amount : last year flynn company reported a profit of 72000 when sales totaled 522000 and the contribution margin ratio was 32.

The bank statement includes a fee of 105 for an nsf check : on october 31 2015 the bank statement for the checking account of greater media shows a balance of 11570 while the

Yukon bike corp manufactures mountain bikes and distributes : yukon bike corp. manufactures mountain bikes and distributes them through retail outlets in canada montana idaho oregon

On december 1 2013 davenport company sold merchandise to a : on december 1 2013 davenport company sold merchandise to a customer for 20000. in payment for the merchandise the

A dam can be lowered by 4 meters using spillway a in 4 : question a dam can be lowered by 4 meters using spillway a in 4 hours or by spillway b in 6 hours also lowering the

In a present value of an annuity of 1 table annual rate : for each of the following cases indicate a to what rate columns and b to what number of periods you would refer in

New tire retreading equipment acquired at a cost of 140000 : new tire retreading equipment acquired at a cost of 140000 at the beginning of a fiscal year has an estimated useful

User Account

All Pages