If a corporation has cumulative preferred stock and has paid dividends of $5, $6, and $7 in the previous three years, what must they pay in 2012 before issuing common stock dividends?

To determine the amount that a corporation must pay in dividends for cumulative preferred stock before it can issue common stock dividends, it is essential to understand the nature of cumulative preferred stock. This type of stock requires that any unpaid dividends from previous years be paid in full before any common stock dividends can be distributed.

In this scenario, the corporation has paid dividends of $5, $6, and $7 over the previous three years. To calculate the total dividend requirement, we first need to establish the dividend amount owed for each of those years.

Assuming that the preferred dividend has been set at a consistent level, and given that the total of dividends paid over the last three years is $5 + $6 + $7 = $18, if we consider the preferred stock may have a set cumulative rate that could be higher than the highest payment made, we can suggest that the required payment for the current year (2012) would need to cover the highest preferred dividend plus three years of unpaid dividends if the dividend was intended to be higher.

If we assume that the preferred dividends were supposed to be higher each year without stating an amount in the query, choosing $10 as a projected amount you must pay in 2012 (which covers the previous payments