SOLVING PROBLEMS

INVOLVING STOCKS
LEARNING OBJECTIVES
• To understand the concept of buying stocks.
• To solve problems involving stocks.
1. The ABC Company declared 3,800,000 dividend last
2018 and has a common stock outstanding shares of
500,000. What are the dividend per share of the
common stock?
Given: dividend = 3,800,000 # of shares =500,000
 

DPS(common) = P7.6
2. A corporation declares an annual dividend
of 5%. Aron owns 500 shares (par value Rs.
80). How much dividend will he receive?
Given: rate of dividend = 0.05 # of shares = 500 DPS(common) = 80

Formula
Dividend = rate of dividend x DPS (common) x no. of shares
Solution
Dividend = 0.05 x 80 x 500
Dividend = 2000
3. Robert bought shares of 6%, 100 shares at
$ 120. Adrian bought shares of 8%, 20 shares
at $ 30. Whose investment was better?
Formula
Dividend = rate of dividend x DPS (common) x no. of shares
Robert
Given: rate of dividend = 0.06 # of shares = 100 DPS(common) = 120
Dividend = 0.06 x 120 x 100
Dividend = $720
Adrian
Given: rate of dividend = 0.08 # of shares = 20 DPS(common) = 30
Dividend = 0.08 x 30 x 20
Dividend = $48

Robert’s investment is better than Adrian’s investment.

4. Let's calculate the dividends per share(common) for a given
company over a one-year period. Let's say that company has $2
million in total dividends over the course of the year plus
$200,000 as the preferred dividend and it has 10 million shares
outstanding.
Given: total dividend = 2,000,000 preferred dividend = 200,000 no. of shares = 10,000,000

Total common dividend = total dividend – total preferred dividend

Total common dividend = 2,000,000 – 200,000
Total common dividend = 1,800,000