1. Wonderful Outboard Watercraft (WOW) Inc. wants to expand to Blanton, Florida and needs cash. Therefore WOW owners are considering offering 30,000 shares of 1% preferred stock of $100 par on the market Currently the existing stockholders hold 100,000 shares of $50 par common stock. You are (still) their Chief Financial Officer and they ask you to prepare a schedule of what dividends the common and the (new) preferred stockholders would get if WOW sells these proposed preferred shares. You have estimated Income for Yr 1, 2, and 3 and determined that the following amounts could be distributed as dividends:
Year 1: $ 50,000
Year 2: 90,000
Year 3: 130,000
1. Determine the dividends per share for preferred and common stock for each year.
2. Prepare a brief memo (no more than 120 words) giving the arguments for and against offering this preferred stock. In the memo also briefly mention other methods of obtaining the cash.