National Health Corporation (NHC) has a cumulative preferred stock issue outstanding, which has a stated annual dividend of $8 per share. The company has been losing money and has not paid preferred dividends for 5 years. There are 350,000 shares of preferred stock outstanding and 650,000 shares fo common stock. 1. how much is the company behind in preferred dividends?

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To determine how much the company is behind in preferred dividends, we first need to calculate the total amount of unpaid dividends for the preferred stock.

The stated annual dividend for the preferred stock is $8 per share, and it has not been paid for 5 years. Therefore, the total unpaid dividends per share can be calculated as follows:

Total unpaid dividends per share = Stated annual dividend per share × Number of years
Total unpaid dividends per share = $8 × 5
Total unpaid dividends per share = $40

Now that we have the total unpaid dividends per share, we can calculate the total amount of unpaid dividends for all the preferred stock:

Total unpaid dividends for preferred stock = Total unpaid dividends per share × Number of preferred shares outstanding
Total unpaid dividends for preferred stock = $40 × 350,000
Total unpaid dividends for preferred stock = $14,000,000

Hence, the company is behind in preferred dividends by $14,000,000.