Question: With the upcoming annual shareholders' meeting only a week away, Chief Executive Officer Christopher Lee had a great deal of information to prepare. There was some very good news to communicate: Profits for the five-year-old plastics company were at record levels and $275,000 was available for dividends to be paid, unlike last year when no dividends were paid. But the business was at a crossroads as well. Technological advancements in the thermoforming industry were forcing individual companies to make substantial investments in advanced production capacity to remain viable. Christopher would be recommending to the Board of Directors a $2.4 million corporate bond issue to pay for the improved production capabilities. In addition, employee retention was also a major goal for the company. Feedback from the employees had focused on the need for a company-sanctioned retirement program. In response, Dynamic Thermoforming, Inc., would be offering a 401(k) retirement program complete with a number of different investment choices, including some of the top mutual fund families. In addition, the first 3% of an employee's salary contributed would be fully matched by the company. Together, these three topics would set the tone for continued success in the marketplace, and surely give a boost to the already favorable employee morale.
1. Dynamic Thermoforming, Inc., has previously issued 25,000 shares of cumulative preferred stock that will earn dividends at $0.70 per share and 75,000 shares of common stock. Because no dividends were paid last year, how will the $275,000 declared for dividends be distributed?
2. A Dynamic Thermoforming $1,000 corporate bond is issued and has a stated interest rate of 5.375% with a current price of 95.50. What is the current yield? Round your answer to the nearest 0.01%.
3. Quentin Avery, a sales manager with Dynamic Thermoforming, decides to put 3% of his $72,000 salary into an international growth fund offered through the new 401(k) plan. The current net asset value is 17.94 and the year-to-date return is . How many shares will Quentin be able to purchase each month, and what was the net asset value of the fund at the beginning of the year?