Calculate total amount of dividends in arrears, Financial Management

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QTL Tech has an issue of preferred shares outstanding with a $50 stated value that pays a dividend of 7.5%. There are 325,000 shares outstanding. QTL has not paid preferred share dividends for 3.5 years. The company's CEO wishes to retire the preferred share issue by paying the preferred shareholders 50% of the dividends in arrears plus 10% of the stated value of the preferred.

a. What is the total amount of dividends in arrears? Provide the per share and total dollars amounts.

b. If the preferred shareholders accepted the CEO's offer, what would be the total payment QTL Tech would have to make to the preferred shareholders on a per share and total dollar basis?

c. QTL Tech common shares are trading for $1.22 on the market. If the CEO offered to convert each preferred share into 5 common shares, would this be a better deal for the preferred shareholders?


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