Pug Corporation Has 10,000 Shares of $10 Par Common Stock

question 105

Multiple Choice

Pug Corporation has 10,000 shares of $10 par common stock outstanding and 20,000 shares of $100 par, 6% noncumulative, nonparticipating preferred stock outstanding. Dividends have not been paid for the past two years. This year, a $150,000 dividend will be paid. What are the dividends per share for preferred and common, respectively?

• A) $7.50; $0.
• B) $6; $3.
• C) $6; $1.50.
• D) None of these answer choices are correct.

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Definitions:

Long Run

In economics, a period in which all inputs can be adjusted by firms, and there are no fixed costs, allowing for full industry adjustment.

Diminishing Returns

An economic principle stating that as investment in a particular area increases, the rate of profit from that investment, after a certain point, begins to decrease.

Marginal Cost

The change in total production cost that arises when the quantity produced is incremented by one unit.

Fixed Cost

Expenses that do not change in proportion to the activity of a business, such as rent, salaries, and loan payments.