Case Study Part 2

Below is a series of questions about equity for a publicly owned company described below. You are required to answer each question. Ensure that your response is concise and conveys that you have a full understanding of the material. Your written responses should be in a separate Word document.

Corliss Corporation is a publicly owned company. The following information is taken from a recent balance sheet. Dollar amounts (except for per-share amounts) are stated in thousands.

Stockholders Equity
Convertible $10 preferred stock, no par value, 1,000,000 shares authorized, 200,000 shares issued and outstanding, $100 per share liquidation preference	$97,200
Common stock, $2 par value, 50,000,000 shares authorized	93,000
Additional paid-in capital	124,750
Retained earnings	87,500
Total stockholders equity	$402,450

Required:

From the information above, answer the following questions (show/describe calculations as appropriate).

1. How many shares of common stock have been issued?
2. What is the total amount of the annual dividends paid to preferred stockholders?
3. What is the total of paid-in capital?
4. What is the book value per share of common stock assuming no dividends and arrears?
5. Explain the advantages and disadvantages to Corliss Corporation of being publicly owned rather than operating as a closely held corporation.
6. What is meant by the term convertible used in the capital of preferred stock? Is there more information that investors need to know to evaluate this conversion feature?
7. Assume that the preferred stock currently is selling at $150 per share. Does this provide a higher or lower dividend yield than a 5 percent, $100 par value preferred with a market price of $77? Show computations. Explain why one preferred stock might yield less than another.