Problem $2$

Andrews Company has $$80,000$ available to pay dividends. It has $2,000$ shares of $10\%,$$$100$ par,

preferred stock and $30,000$ shares of $$10$ par common stock outstanding. The preferred stock is selling

for $$125$ per share, and the common stock is selling for $$20$ per share.

Required

Determine the amount of dividends to be paid to each class of shareholder for each of the following

independent assumptions:

a$.$ Preferred stock is non$-$participating and non$-$cumulative.

b$.$ Preferred stock is non$-$participating and cumulative. Preferred dividends are $2$ years in

arrears at the beginning of the year.

c$.$ Preferred stock is fully participating and cumulative. Preferred dividends are $1$ year in

arrears at the beginning of the year. The common stock dividend rate is $10\%.$

$1($a$)$ compute the dividend yield on the preferred stock and the common stock.