Use the Following Information for Questions

question 33

Multiple Choice

Use the following information for questions
Harbour Co. has $200,000 of no par value 4% cumulative preferred shares, and 12,000 shares of no par value common shares outstanding. In its first three years of operation, the company paid cash dividends as follows: Year 1: $8,000; Year 2: $18,000; and Year 3: $24,000.
-The amount of dividends received by the preferred shareholders in year 2 was:

• A)$8,000
• B)$9,000
• C)$12,000
• D)$18,000

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Definitions:

Market Value

The going rate for an asset or service available for exchange in the open market.

Equity

The value of an asset after deducting the value of liabilities, representing ownership interest in a company or property.

Cost of Capital

The rate of return that a company must earn on its project investments to maintain its market value and attract funds.

Debt/Equity Ratio

A fiscal ratio that reflects the comparative amount of equity from shareholders and borrowed funds utilized to support a company's resources.