Alloy Garde Corporation Dividend Allocation

How much in dividends must Alloy Garde declare each year before the common stockholders receive any cash dividends for the year?

Dividends the company must declare each year before the common stockholders receive any cash dividends = Aloy Garde Corporation has 175,000 shares of $1.35 preferred stock outstanding in addition to Aloy Garde declares an annual dividend of $500,000. The allocation to preferred and common:

Answer:

Alloy Garde Corporation must declare $263,750 in dividends each year before the common stockholders receive any cash dividends.

To calculate the amount of dividends Alloy Garde Corporation must declare each year before the common stockholders receive any cash dividends, we need to subtract the dividends allocated to the preferred stockholders from the total dividend declared.

Given that Alloy Garde Corporation has 175,000 shares of $1.35 preferred stock outstanding, the annual dividend allocated to preferred stockholders is calculated by multiplying the number of preferred shares (175,000) by the dividend per share ($1.35). This gives us: 175,000 shares * $1.35/share = $236,250.

Now, to find the amount of dividends the company must declare each year before the common stockholders receive any cash dividends, we subtract the preferred stock dividend allocation from the total dividend declared. In this case, the total dividend declared is $500,000. So, the amount of dividends the company must declare each year before the common stockholders receive any cash dividends is: $500,000 - $236,250 = $263,750.