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Folic Acid Inc. has $28 million in earnings, pays $3.8 million in interest to bondholders, and $2.4 million in dividends to preferred stockholders. What are the common stockholders' residual claims to earnings? (Do not round intermediate calculations. Enter your answer in millions rounded to 2 decimal places (e.g., $1.23 million should be entered as "1.23").) Residual claims to earnings million

Folic Acid Inc. has $28 million in earnings, pays $3.8 million in interest to bondholders, and $2.4 million in dividends to preferred stockholders. What are the common stockholders' residual claims to earnings? (Do not round intermediate calculations. Enter your answer in millions rounded to 2 decimal places (e.g., $1.23 million should be entered as "1.23").) Residual claims to earnings million

Essentials Of Investments
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
Section: Chapter Questions
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Folic Acid Inc. has $28 million in earnings, pays $3.8 million in interest 1 bondholders, and $2.4 million in dividends to preferred stockholders. What are the common stockholders' residual claims to earnings? (Do not round intermediate calculations. Enter your answer in millions rounded to 2 decimal places (e.g., $1.23 million should be entered as "1.23").) Residual claims to earnings million
Transcribed Image Text:Folic Acid Inc. has $28 million in earnings, pays $3.8 million in interest 1 bondholders, and $2.4 million in dividends to preferred stockholders. What are the common stockholders' residual claims to earnings? (Do not round intermediate calculations. Enter your answer in millions rounded to 2 decimal places (e.g., $1.23 million should be entered as "1.23").) Residual claims to earnings million
Expert Solution
Step 1: Introduction and Formula

Solution:

Common stockholders of an entity have the residual claim over the earnings of the entity after payment of interest to bond holders and dividend to preferred stockholders.

So, common stockholders residual claims to earnings = Total earnings – Payment of interest to bondholders – Payment of dividend to preferred stock holders

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