Problem 2:

Slater Lamp Manufacturing has an outstanding issue of preferred stock with a par value of

$40 and an 18% annual dividend.

a. What is the annual dollar dividend? If it is paid quarterly, how much will be paid each quarter?

b. If the preferred stock is noncumulative and the board of directors has passed the preferred dividend for the last 1 quarter, how much must be paid to preferred stockholders in the current quarter before dividends are paid to common stockholders?

c. If the preferred stock is cumulative and the board of directors has passed the preferred dividend for the last 1 quarter, how much must be paid to preferred stockholders in the current quarter before dividends are paid to common stockholders?