You are considering purchasing the preferred stock of a firm

You are considering purchasing the preferred stock of a firm but are concerned about its capacity to pay the dividend. To help allay that fear, you compute the times-preferred-dividend-earned ratio for the past three years from the following data taken from the firm's financial statements:     

Year     X1     X2     X3
Operating Income     12000000     15000000     17000000
Interest     3000000     5900000     11000000
Taxes     4000000     5400000     4000000
Preferred dividends     1000000     1000000     1500000
Common dividends     3000000     2000000     -

What does your analysis indicate about the firm's capacity to pay preferred stock dividends?

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What does your analysis indicate about the firm's capacity to pay preferred stock dividends?

	X1	X2	X3
Operating Income	$ 12,000,000	$ 15,000,000	$ 17,000,000

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