Accounting II: PLEASE HELP!!?

Question

Preferred stock was sold at $80 par and was composed of $10,000 shares of 4%,and 100,000 shares of common stock, $10 par was sold at par at the beginning of the six year period, calculate the average return on initial shareholders' investment based on the average annual dividend per share (a) for preferred stock and (b) for common stock.
2003 - $21,000
2004 - $50,000
2005 - $15,000
2006 - $80,000
2007 - $90,000
2008 - $140,000

The average annual dividend for preferred stock is $2.73. If someone can help me answer the preferred stock, I can figure out the common stock.

Answer 1

Check your lesson notes and what your prof was wanting, his examples for instance.

A company is concerned with par values at the initial capitalization phase. Afterwards it has no relevance other than a benchmark for subsequent value, most practically for conversation' sake.

So the common stock was sold at its $10 par value for the initial capitalization. Care to tell what the "average annual dividend per share . . . and (b) for common stock"--you didn't say what the stock's dividend was, much less its average.

Frankly, I like the idea, as your verbage implies, paying $80 and getting $10,000 shares of preferred stock. Read the problem a little closer, there are things missing.

Answer 2

Best Answer - Chosen By Voters Best Answer - Chosen By Voters THE ANSWERS: Q1. In the n the month: Bakar earns 1000 + 100(n - 1). His pay is increasing in arithmetic progression, with a starting value of 1000 and a common difference of 100. Chandran makes 100 * 1.5^ (n - 1). His pay is increasing in geometric progression, with a starting value of 100 and a common ratio of 1.5. a) At the end of the first year, Chandran has: 6(2*1000 + 11*100) = 6 * 3100 = 18600 RM. That's using the formula for the sum of an arithmetic series. You can also find the average monthly pay and multiply that by 6. It's not really different though. Chandran has 100(1.5^12 - 1) / (1.5 - 1) = 25749.27 RM. That's using the formula for the sum of a geometric series. I don't know any alternative technique for doing this, unless you are going to calculate from first principles, as you do when proving the formula. Ang earns 2000 * 12 = 24000 RM. If you want another method, add up 12 lots of 2000, but what's the difference? b) Work out the income of each for the second year, taking into account the increased salary for Ang, and the changes in the starting pay and common difference for Chadran. Presumably Bakar continues in the same manner as before. When you have the incomes worked out for the second year, you can find the percentage increase. c) i) RM10778.00 RM10938.07 RM11097.02 ii) The 3.5% is going to give you a higher interest... the difference in the compounding periods is negated by the fact that each different compounding period has a higher interest rate than the previous. Had all been the same interest rate the monthly one would have given you a slightly larger return. For instance all been 2.5% per annum... the quarterly (every three months) would have yielded only 776.33 None of them... they don't pay enough... I would invest the money in stocks... Q2. a) RM 300-8% per annum for 18yrs 1st year- 300(8/100) =24 Hence RM300+RM24=RM324 2nd year- 324(8/100) =25.92 Hence RM324+RM25.92=RM349.92 *this continues until the 18th year-RM1198.79 (ans) b) RM500- 8% per annum-total investment will be more than RM25000 for the first time Use the same technique above in Q2 (a) to apply on this question.. The answer will be 50years 11months-RM25171.42