Lone Star Theatre Inc. owns and operates movie theaters throughout Arizona and Texas. Lone Star Theatre has declared the following annual dividends over a six-year period: 2005, $7,500; 2006, $9,000; 2007, $30,000; 2008, $30,000; 2009, $40,000; and 2010, $48,500. During the entire period ending December 31 of each year, the outstanding stock of the company was composed of 10,000 shares of cumulative, 2% preferred stock, $50 par, and 50,000 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, 2005.

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 a market price per share of $40 for the preferred stock and $5 for the common stock, 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.

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Preferred Dividends Total Common Dividends Total Total Dividends $ 7,500 Per Share Per Share Year 2005 2006 9,000 2007 2008 2009 2010 30,000 30,000 40,000 48,500