Lemonds Corp. manufactures mountain bikes and distributes them through retail outlets in Oregon and Washington. Lemonds Corp. has declared the following annual dividends over a six-year period: 2003, $40,000; 2004, $18,000; 2005, $24,000; 2006, $27,000; 2007, $65,000; and 2008, $54,000. During the entire period, the outstanding stock of the company was composed of

25,000 shares of cumulative, 6% preferred stock, $20 par, and 40,000 shares of common stock, $1 par.

Instructions

1. Calculate 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, 2003. Summarize the data in tabular form, using the following column headings:

2. Calculate the average annual dividend per share for each class of stock for the six-year period.
3. Assuming that the preferred stock was sold at par and common stock was sold at $8 at the beginning of the six-year period, 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 commonstock.

Transcribed Image Text:

Preferred Dividends PEC Common Dividends Total Dividends Total Year 2003 2004 2005 2006 2007 2008 Per Share Total Per Share $40,000 18,000 24,000 27,000 65,000 54,000