Problem 17.18 (Algo) Preferred stock dividends in arrears [LO17.5] Robbins Petroleum Company is five years in arrears on cumulative preferred stock dividends. There are 730,000 preferred shares outstanding, and the annual dividend is $5.50 per share. The Vice.President of Finance sees no real hope of paying the dividends in arrears. She is devising a plan to compensate the preferred stockholders for 80 percent of the dividends in arrears. a. How much should the compensation be? Note: Do not round intermediate calculations. Input your answer in dollars, not millions (e.9.$1,234,000). b. Robbins will compensate the preferred stockholders in the form of bonds paying 12 percent interest in a market environment in which the going rate of interest is 14 percent for similar bonds. The bonds will have a 15 -year maturity. Using the bond valuation Table 16-2, indicate the market value of a $1,000 par value bond Note: Round your answer to the nearest whole number. b. Robbins will compensate the preferred stockholders in the form of bonds paying 12 percent interest in a market ertvironment in which the going rate of interest is 14 percent for similar bonds. The bonds will have a 15 -year maturity Using the bond valuation Table 16-2, indicate the market value of a $1,000 par value bond Note: Round your answer to the nearest whole number. c. Based on market value, how many bonds must be issued to provide the compensation determined in part a? Note: Do not round intermediate calculations and round your answer to the nearest whole number. Problem 17.18 (Algo) Preferred stock dividends in arrears [LO17.5] Robbins Petroleum Company is five years in arrears on cumulative preferred stock dividends. There are 730,000 preferred shares outstanding, and the annual dividend is $5.50 per share. The Vice.President of Finance sees no real hope of paying the dividends in arrears. She is devising a plan to compensate the preferred stockholders for 80 percent of the dividends in arrears. a. How much should the compensation be? Note: Do not round intermediate calculations. Input your answer in dollars, not millions (e.9.$1,234,000). b. Robbins will compensate the preferred stockholders in the form of bonds paying 12 percent interest in a market environment in which the going rate of interest is 14 percent for similar bonds. The bonds will have a 15 -year maturity. Using the bond valuation Table 16-2, indicate the market value of a $1,000 par value bond Note: Round your answer to the nearest whole number. b. Robbins will compensate the preferred stockholders in the form of bonds paying 12 percent interest in a market ertvironment in which the going rate of interest is 14 percent for similar bonds. The bonds will have a 15 -year maturity Using the bond valuation Table 16-2, indicate the market value of a $1,000 par value bond Note: Round your answer to the nearest whole number. c. Based on market value, how many bonds must be issued to provide the compensation determined in part a? Note: Do not round intermediate calculations and round your answer to the nearest whole number
