Yosemite Bike Corp. manufactures mountain bikes and distributes them through retail outlets in California, Oregon, and Washington. Yosemite Bike Corp. has declared the following annual dividends over a six-year period ended December 31 of each year: Year 1, $24,000; Year 2, $10,000; Year 3, $126,000; Year 4, $100,000; Year 5, $125,000; and Year 6, $125,000. During the entire period, the outstanding stock of the company was composed of 25,000 shares of cumulative preferred 2% stock, $90 par, and 100,000 shares of common stock, $4 par. Required: 1. Determine the total dividends and the per-share dividends declared on each class of stock for each of the six years. There were no dividends in arrears on January 1, Year 1. Summarize the data in tabular form. If required, round your answers to two decimal places. If the amount is zero, please enter "0". Preferred Dividends Common Dividends Year TotalDividends Total Per Share Total Per Share Year 1 $24,000 $fill in the blank 1 $fill in the blank 2 $fill in the blank 3 $fill in the blank 4 Year 2 10,000 fill in the blank 5 fill in the blank 6 fill in the blank 7 fill in the blank 8 Year 3 126,000 fill in the blank 9 fill in the blank 10 fill in the blank 11 fill in the blank 12 Year 4 100,000 fill in the blank 13 fill in the blank 14 fill in the blank 15 fill in the blank 16 Year 5 125,000 fill in the blank 17 fill in the blank 18 fill in the blank 19 fill in the blank 20 Year 6 125,000 fill in the blank 21 fill in the blank 22 fill in the blank 23 fill in the blank 24 $fill in the blank 25 $fill in the blank 26 2. Determine the average annual dividend per share for each class of stock for the six year period. Round your answers to two decimal places. Average annual dividend for preferred stock $fill in the blank 27 per share Average annual dividend for common stock $fill in the blank 28 per share 3. Assuming a market price of $100 for the preferred stock and $5 for the common stock, 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. Round your answers to one decimal place.
Dividend Valuation
Dividend refers to a reward or cash that a company gives to its shareholders out of the profits. Dividends can be issued in various forms such as cash payment, stocks, or in any other form as per the company norms. It is usually a part of the profit that the company shares with its shareholders.
Dividend Discount Model
Dividend payments are generally paid to investors or shareholders of a company when the company earns profit for the year, thus representing growth. The dividend discount model is an important method used to forecast the price of a company’s stock. It is based on the computation methodology that the present value of all its future dividends is equivalent to the value of the company.
Capital Gains Yield
It may be referred to as the earnings generated on an investment over a particular period of time. It is generally expressed as a percentage and includes some dividends or interest earned by holding a particular security. Cases, where it is higher normally, indicate the higher income and lower risk. It is mostly computed on an annual basis and is different from the total return on investment. In case it becomes too high, indicates that either the stock prices are going down or the company is paying higher dividends.
Stock Valuation
In simple words, stock valuation is a tool to calculate the current price, or value, of a company. It is used to not only calculate the value of the company but help an investor decide if they want to buy, sell or hold a company's stocks.
Yosemite Bike Corp. manufactures mountain bikes and distributes them through retail outlets in California, Oregon, and Washington. Yosemite Bike Corp. has declared the following annual dividends over a six-year period ended December 31 of each year: Year 1, $24,000; Year 2, $10,000; Year 3, $126,000; Year 4, $100,000; Year 5, $125,000; and Year 6, $125,000. During the entire period, the outstanding stock of the company was composed of 25,000 shares of cumulative preferred 2% stock, $90 par, and 100,000 shares of common stock, $4 par.
Required:
1. Determine the total dividends and the per-share dividends declared on each class of stock for each of the six years. There were no dividends in arrears on January 1, Year 1. Summarize the data in tabular form. If required, round your answers to two decimal places. If the amount is zero, please enter "0".
| Preferred Dividends | Common Dividends | |||||||||||||||||||
Year |
Total Dividends |
Total |
Per Share |
Total |
Per Share |
|||||||||||||||
| Year 1 | $24,000 | $fill in the blank 1 | $fill in the blank 2 | $fill in the blank 3 | $fill in the blank 4 | |||||||||||||||
| Year 2 | 10,000 | fill in the blank 5 | fill in the blank 6 | fill in the blank 7 | fill in the blank 8 | |||||||||||||||
| Year 3 | 126,000 | fill in the blank 9 | fill in the blank 10 | fill in the blank 11 | fill in the blank 12 | |||||||||||||||
| Year 4 | 100,000 | fill in the blank 13 | fill in the blank 14 | fill in the blank 15 | fill in the blank 16 | |||||||||||||||
| Year 5 | 125,000 | fill in the blank 17 | fill in the blank 18 | fill in the blank 19 | fill in the blank 20 | |||||||||||||||
| Year 6 | 125,000 | fill in the blank 21 | fill in the blank 22 | fill in the blank 23 | fill in the blank 24 | |||||||||||||||
| $fill in the blank 25 | $fill in the blank 26 |
2. Determine the average annual dividend per share for each class of stock for the six year period. Round your answers to two decimal places.
| Average annual dividend for preferred stock | $fill in the blank 27 per share |
| Average annual dividend for common stock | $fill in the blank 28 per share |
3. Assuming a market price of $100 for the preferred stock and $5 for the common stock, 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. Round your answers to one decimal place.
| Preferred stock | fill in the blank 29 % |
| Common stock | fill in the blank 30 % |
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