You are considering purchasing the preferred stock of a firm but are concerned about its capacity to pay the dividend. To help allay that fear, you compute the times-preferred-dividend-earned ratio for the past three years from the following data taken from the firm’s financial statements: Year 20X1 20X2 20X3 Operating income $ 18,000,000 $ 16,000,000 $ 14,000,000 Interest 6,500,000 5,500,000 3,300,000 Taxes 4,200,000 4,800,000 5,400,000 Preferred dividends 1,500,000 800,000 700,000 Common dividends 2,500,000 3,500,000 — Round your answers to two decimal places. 20X1: 20X2: 20X3: What does your analysis indicate about the firm’s capacity to pay preferred stock dividends? Times preferred dividend earned has (declined or increased) each year, which indicates the firm's capacity to pay the dividend has (diminished or improved)
You are considering purchasing the preferred stock of a firm but are concerned about its capacity to pay the dividend. To help allay that fear, you compute the times-preferred-dividend-earned ratio for the past three years from the following data taken from the firm’s financial statements: Year 20X1 20X2 20X3 Operating income $ 18,000,000 $ 16,000,000 $ 14,000,000 Interest 6,500,000 5,500,000 3,300,000 Taxes 4,200,000 4,800,000 5,400,000 Preferred dividends 1,500,000 800,000 700,000 Common dividends 2,500,000 3,500,000 — Round your answers to two decimal places. 20X1: 20X2: 20X3: What does your analysis indicate about the firm’s capacity to pay preferred stock dividends? Times preferred dividend earned has (declined or increased) each year, which indicates the firm's capacity to pay the dividend has (diminished or improved)
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
Related questions
Question
You are considering purchasing the
| Year | 20X1 | 20X2 | 20X3 | |||
| Operating income | $ | 18,000,000 | $ | 16,000,000 | $ | 14,000,000 |
| Interest | 6,500,000 | 5,500,000 | 3,300,000 | |||
| Taxes | 4,200,000 | 4,800,000 | 5,400,000 | |||
| Preferred dividends | 1,500,000 | 800,000 | 700,000 | |||
| Common dividends | 2,500,000 | 3,500,000 | — |
Round your answers to two decimal places.
20X1:
20X2:
20X3:
What does your analysis indicate about the firm’s capacity to pay preferred stock dividends?
Times preferred dividend earned has (declined or increased) each year, which indicates the firm's capacity to pay the dividend has (diminished or improved)
Expert Solution
Step 1
The cash distributions that a corporation hands out to its preferential owners are known as the preferred dividends.
Trending now
This is a popular solution!
Step by step
Solved in 2 steps with 2 images
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, finance and related others by exploring similar questions and additional content below.Recommended textbooks for you
Essentials Of Investments
Finance
ISBN:
9781260013924
Author:
Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:
Mcgraw-hill Education,
Essentials Of Investments
Finance
ISBN:
9781260013924
Author:
Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:
Mcgraw-hill Education,
Foundations Of Finance
Finance
ISBN:
9780134897264
Author:
KEOWN, Arthur J., Martin, John D., PETTY, J. William
Publisher:
Pearson,
Fundamentals of Financial Management (MindTap Cou…
Finance
ISBN:
9781337395250
Author:
Eugene F. Brigham, Joel F. Houston
Publisher:
Cengage Learning
Corporate Finance (The Mcgraw-hill/Irwin Series i…
Finance
ISBN:
9780077861759
Author:
Stephen A. Ross Franco Modigliani Professor of Financial Economics Professor, Randolph W Westerfield Robert R. Dockson Deans Chair in Bus. Admin., Jeffrey Jaffe, Bradford D Jordan Professor
Publisher:
McGraw-Hill Education