ECONOMICS (CBSE/UGC NET)

Detailed explanation-1: -How to Calculate Preferred Dividend. All issuances of preferred stock contain the equity’s dividend rate and par value in the preferred stock prospectus. The dividend rate multiplied by the par value equates to the total annual preferred dividend.

Detailed explanation-2: -Preferred shareholders have priority over a company’s income, meaning they are paid dividends before common shareholders. Common stockholders are last in line when it comes to company assets, which means they will be paid out after creditors, bondholders, and preferred shareholders.

Detailed explanation-3: -The formula for calculating the cost of preferred stock is the annual preferred dividend payment divided by the current share price of the stock.

Detailed explanation-4: -Preferred stock is typically given a dividend preference over common stock, which means that a dividend must be paid to the preferred stock before any dividend is paid to the common stock.