Detailed Answer
(d) The requirement is to calculate the expected dividend
per share. Earnings after interest is equal to $30 million
($35 million – $5 million). Net earnings after taxes is equal to
$18 million [$30 million × 1 – Tax rate (40%)]. The net earnings
after dividends to preferred shareholders is equal to $14
million ($18 million – $4 million), and the dividend for common
stockholders is equal to $4,200,000 ($14 million × 30%). The
dividend per share is equal to $4,200,000/$2 million shares =
$2.10. Therefore, the correct answer is (d).