Question
Help needed on this problem Pretend that it is now January 1, 2009. Clamato, Inc. has issued cumulative preferred stock with an annual 10% dividend
Help needed on this problem
Pretend that it is now January 1, 2009. Clamato, Inc. has issued cumulative preferred stock with an annual 10% dividend and a par value of $25 per share. They also have common stock outstanding that has historically paid a $0.06 per share dividend.
a.How many dollars are expected to be paid out as a preferred stock dividend (per share) in 2009?
b.Suppose that next year (2010) that Clamato experiences some cash flow problems and for the first time ever, the company decides not to pay their preferred and common stock dividends. One year later, (2011), the firm wishes to pay a $0.07 per share common stock dividend. How much will the company pay to an investor that holds one share of common stock and one share of preferred stock in 2011?
c.If the investor is a U.S. individual with a large ownership in Clamato, Inc., what percent of the preferred stock dividend will be taxable, according to the U.S. tax code?
d.If the investor is a U.S. corporation with a small ownership in Clamato, what percent of the preferred stock dividend will be taxable, according to the U.S. tax code?
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