Enterprise Storage Company has 400,000 shares of cumulative preferred stock outstanding, which has a stated dividend of $4.75. It is six years in arrears in its dividend payments. Use Appendix B.

a. How much in total dollars is the company behind in its payments?

Dividend in arrears $

b. The firm proposes to offer new common shares to the preferred shareholders to wipe out the deficit. The common stock will pay the following dividends over the next four years:

D1	$1.25
D2	1.50
D3	1.75
D4	2.00

The company anticipates earnings per share after four years will be $4.05 with a P/E ratio of 12.

The common stock will be valued as the present value of future dividends plus the present value of the future stock price after four years. The discount rate used by the investment dealer is 10 percent.

What is the calculated value of the common stock? (Round "PV Factor" to 3 decimal places. Do not round intermediate calculations. Round the final answer to 2 decimal places.)

Common stock $

c. How many shares of common stock must be issued at the value computed in part b to eliminate the deficit (arrears) computed in part a? (Round the final answer to the nearest whole number.)

Number of shares of common stock