Q1. Assume that Hunter Corporation has 30,000 shares of common stock outstanding at $100 par. Each share will receive a $10 dividend. (It's a 10% stock, so $100 x 10% = $10.)

The company also has 5,000 shares of cumulative, participating, preferred stock outstanding at $100 par. Each share will receive a $10 dividend payment. (It's also a 10% preferred stock, so $100 x 10% = $10.) This stock participates at the 20% level, meaning that these stockholders will receive 20% of whatever excess dividends are left over after the initial dividends have been paid to both sets of stockholders.

a. What's the total dividend payment if both the preferred and common stockholders if receive their $10 a share?

b. If Hunter Corporation commits to paying a total $450,000, what is the total dividend payment to preferred shareholders? What is the total dividend payment to common shareholders?

c. Using your answers to b. above, what is the dividend per share of preferred stock? What is the dividend per share of common stock?

Q2. When Fujioka Company incorporated, it was approved to authorize 1,000,000 shares of common stock. During the first five years it sold 350,000 shares and repurchased 25,000 on the open market. At the end of five years:

a. How many shares were authorized?

b. How many shares were issued?

c. How many shares were outstanding?

Q3. Assume you want to invest in Sam's company. You have a choice of buying preferred stock, common stock or to loan her the same amount. Select the option that suits you best, and explain why you would choose it. Would your answer be affected by age or family circumstances? (Note: There is no right or wrong answer to this question. Please be sure to include the characteristics that make your choice most attractive and the reasons you didn't select the other alternatives.)