Question - Avaya Corporation had the following stock outstanding from 2011 through 2014. Preferred stock: 100 par value 8 percent cumulative, 5,000 shares authorized, issued, and outstanding. Common stock: $ 10 par value, 100,000 shares authorized, issued, and outstanding.
The company paid $30,000 $49,000, and $130,000 in dividends during 2011, 2012, 2013, respectively. The market price per common share was $7.25 and $8.00 per share at the end of years 2013 and 2014 respectively.
Required -
1. Determine the dividends per share and the total dividends paid to common stock-holders and preferred stock holders in 2011, 2012, 2013, and 2014.
2. Perform the same computations with the assumptions that the preferred stock was noncumulative.
3. Business Application. Calculate the 2013 and 2014 dividend yield for common stock using the dividend per share computed in requirements.
4. Accounting Connection: How are cumulative preferred stock and non-cumlative preferred stock similar to long term bonds? How do they differ from long term bonds?