a. If legal capital is assumed to include all paid-in capital, the most the firm can pay in cash dividends to each common stockholder is $ (R

Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
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Dividend constraints A firm has $700,000 in paid-in capital, retained earnings of $33,000 (including the current year's earnings), and 25,000 shares of common stock
outstanding. In the current year, it has $23,000 of earnings available for the common stockholders.
a. What is the most the firm can pay in cash dividends to each common stockholder? (Assume that legal capital includes all paid-in capital.)
b. What effect would a cash dividend of $1.29 per share have on the firm's balance sheet entries?
c. If the firm cannot raise any new funds from external sources, what do you consider the key constraint with respect to the magnitude of the firm's dividend payments?
gnments
dy Plan
a. If legal capital is assumed to include all paid-in capital, the most the firm can pay in cash dividends to each common stockholder is $
(Round to the nearest cent.)
sults
arson eText
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inancial Calculat
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Transcribed Image Text:e Home Dividend constraints A firm has $700,000 in paid-in capital, retained earnings of $33,000 (including the current year's earnings), and 25,000 shares of common stock outstanding. In the current year, it has $23,000 of earnings available for the common stockholders. a. What is the most the firm can pay in cash dividends to each common stockholder? (Assume that legal capital includes all paid-in capital.) b. What effect would a cash dividend of $1.29 per share have on the firm's balance sheet entries? c. If the firm cannot raise any new funds from external sources, what do you consider the key constraint with respect to the magnitude of the firm's dividend payments? gnments dy Plan a. If legal capital is assumed to include all paid-in capital, the most the firm can pay in cash dividends to each common stockholder is $ (Round to the nearest cent.) sults arson eText ultimedia Librai inancial Calculat Chapter Resource Enter your answer in the answer box and then click Check Answer. Dynamic Study Modules parts remaining Clear All Check Answer Communication Tools > 6:20 P Type here to search 5/9/20 112 insert 144 %23 &
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