-
The capital of a company is made up of 50000 preferred shares with dividend of 20% and 20000 common shares, the par value of each type of share being $ 10. The company had a total profit of $ 180000 out of which $ 30000 were kept in reserve fund and the remaining distributed to shareholders. Find out the dividend percent to the common shareholders.
-
- 24 %
- 20 %
- 25 %
- 30 %
Correct Option: C
Given :- Face value of each share = $ 10
Number of preferred shares = 50000
Total number of preferred shares = Number of preferred shares x Face value of each share
= 50000 x 10 = 500000
Number of common shares = 20000
The total profit of the company = $ 180000.
Amount kept in reserve fund = $ 30000
∴ Net amount paid as dividend to shareholders = The total profit of the company - reserve fund
= $ (180000 - 30000) = $ 150000
Dividend paid by the company on 50000 preferred shares
= 20% of Total number of preferred shares
| = $ |  | 500000 x |  | = $ 100000 | 100 |
∴ Dividend to be paid to common shareholders = Net amount paid as dividend to shareholders - Dividend paid by the company on 50000 preferred shares
= $ (150000 - 100000) = $ 50000.
Thus, dividend paid on a common share
| = $ | | | Number of common shares |
| = $ | | | = $ 2.50 | 20000 |
Hence, dividend percent paid on a common share
| = | | x 100% | Face value of one share |
| = $ | | x 100 | | % = 25% | 10 |
