Wetzel, Inc. has 20,000 shares of cumulative preferred stock outstanding, with annual dividends paid at a rate of $2 per share. Wetzel, Inc. also has 40,000 shares of common stock outstanding. Preferred dividends are in arrears from the prior year and the number of shares remained the same for this year and last year.

If Wetzel, Inc. declares a $400,000 dividend in the current year, each outstanding share of common stock would receive: (Round your answer to the nearest cent.)

$8 per share

Explanation:

Preferred annual dividend outstanding paid this year = 20,000 * $2 = $40,000

Preferred annual dividend outstanding for the year and paid = 20,000 * $2 = $40,000

Common stock dividend paid this year = $400,000 - $40,000 - $40,000 = $320,000

Common stock dividend per share = $320,000/40,000 = $8 per share

Therefore, each outstanding share of common stock would receive $8.00 per share.

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