Yosemite Bike Corp. manufactures mountain bikes and distributes them through retail outlets in California

Yosemite Bike Corp. manufactures mountain bikes and distributes them through retail

outlets in California, Oregon, and Washington. Yosemite Bike Corp. has declared the
following annual dividends over a six-year period ended December 31 of each year:
2009, $24,000; 2010, $10,000; 2011, $126,000; 2012, $100,000; 2013, $125,000; and 2014, $125,000. During the entire period, the outstanding stock of the company was composed of 25,000 shares of cumulative preferred 2% stock, $90 par, and 100,000 shares of common stock, $4 par.


Instructions
1. Determine the total dividends and the per-share dividends declared on each class of stock for each of the six years. There were no dividends in arrears on January 1, 2009. Summarize the data in tabular form, using the following column headings:

YearTotalDividendsPreferred Dividends Common DividendsTotal Per Share Total Per Share2009 $ 24,0002010 10,0002011 126,0002012 100,0002013 125,0002014 125,000
2. Determine the average annual dividend per share for each class of stock for the sixyear period.
3. Assuming a market price of $100 for the preferred stock and $5 for the common stock, calculate the average annual percentage return on initial shareholders’ investment, based on the average annual dividend per share (a) for preferred stock and (b) for common stock.

Answers:1. PreferredDividends CommonDividendsTotal Per PerYear Dividends Total Share Total Share2009…………… $ 24,000 $ 24,000 $ 0.96 $ 0 $0.002010………… 10,000 10,000 0.40 0 0.002011…………… 126,000 101,000* 4.04 25,000 0.252012………… 100,000 45,000 1.80 55,000 0.552013…………… 125,000 45,000 1.80 80,000 0.802014………… 125,000 45,000 1.80 80,000 0.80$10.80 $2.40* $101,000 = (2009 dividends in arrears of $11,000) +(2010 dividends in arrears of $45,000) +(2011 current dividend of $45,000)


2.Average annual dividend for preferred: $1.80 per share ($10.80 ÷ 6)Average annual dividend for common: $0.40 per share ($2.40 ÷ 6)
3.a. 1.8% ($1.80 ÷ $100)b. 8.0% ($0.40 ÷ $5.00)