Question
Case Study Part 2 Below is a series of questions about equity for a publicly owned company described below. You are required to answer each
Case Study Part 2
Below is a series of questions about equity for a publicly owned company described below. You are required to answer each question. Ensure that your response is concise and conveys that you have a full understanding of the material. Your written responses should be in a separate Word document.
Corliss Corporation is a publicly owned company. The following information is taken from a recent balance sheet. Dollar amounts (except for per-share amounts) are stated in thousands.
Stockholders Equity | |
Convertible $10 preferred stock, no par value, 1,000,000 shares authorized, 200,000 shares issued and outstanding, $100 per share liquidation preference | $97,200 |
Common stock, $2 par value, 50,000,000 shares authorized | 93,000 |
Additional paid-in capital | 124,750 |
Retained earnings | 87,500 |
Total stockholders equity | $402,450 |
Required:
From the information above, answer the following questions (show/describe calculations as appropriate).
- How many shares of common stock have been issued?
- What is the total amount of the annual dividends paid to preferred stockholders?
- What is the total of paid-in capital?
- What is the book value per share of common stock assuming no dividends and arrears?
- Explain the advantages and disadvantages to Corliss Corporation of being publicly owned rather than operating as a closely held corporation.
- What is meant by the term convertible used in the capital of preferred stock? Is there more information that investors need to know to evaluate this conversion feature?
- Assume that the preferred stock currently is selling at $150 per share. Does this provide a higher or lower dividend yield than a 5 percent, $100 par value preferred with a market price of $77? Show computations. Explain why one preferred stock might yield less than another.
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