Cindy has just opened a hair salon and wants to bring more customers in. She's just starting out so she doesn't having anything free to offer, but she can adjust her regular prices if it will increase her overall sales. Which sales promotion is she considering?

a. $18,000

Explanation:

Cumulative Preferred Shares are shares where the company will always pay Preferred dividends and in years they cannot, they accrue it till a time when they can.

In the above question the dividends due to Preferred Shares are,

= 4% * 200,000

= $8,000

In Year 1, $8,000 were declared as dividends.

= 8,000 - 8,000

= 0

This means that the company does not owe preferred dividends from Year 1.

In Year 2, $18,000 was declared as dividends,

= 18,000 - 8,000

= $8,000

This means that in Year 2, the company was able to pay off Preferred dividends and still have some left to pay off Common Shareholders.

In Year 3, $24,000 was declared as dividends.

= 24,000 - 8,000

= $16,000

In year 3 as well, tue company had enough to pay off it's Preferred Dividend obligations meaning that it paid off all of it.

In Year 3 therefore, Preferred Shareholders got the entire $8,000 that was due to them.