Your firm successfully issued new debt last year, but the debt carries covenants. Specifically, you can only pay dividends out of earnings made after the debt issue and you must maintain a minimum quick (acid-test) ratio (Current Assets-Inventory)/Current Liabilities of 1.2. Your net income this year was $70. 3 million. Your cash is $10.3 million, your receivables are $7.9 million, and your inventory is $4.9 million. You have current liabilities of $19.3 million. What is the maximum dividend you could pay (in cash and in stock) this year and still comply with your covenants? The maximum dividend would be $ million (Round to one decimal place.)
Your firm successfully issued new debt last year, but the debt carries covenants. Specifically, you can only pay dividends out of earnings made after the debt issue and you must maintain a minimum quick (acid-test) ratio (Current Assets-Inventory)/Current Liabilities of 1.2. Your net income this year was $70. 3 million. Your cash is $10.3 million, your receivables are $7.9 million, and your inventory is $4.9 million. You have current liabilities of $19.3 million. What is the maximum dividend you could pay (in cash and in stock) this year and still comply with your covenants? The maximum dividend would be $ million (Round to one decimal place.)
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
Problem 1PS
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Transcribed Image Text:Your firm successfully issued new debt last year, but the debt carries covenants. Specifically, you can only pay
dividends out of earnings made after the debt issue and you must maintain a minimum quick (acid-test) ratio
(Current Assets - Inventory)/Current Liabilities
of 1.2. Your net income this year was $70.3 million. Your cash is $10.3 million, your receivables are $7.9 million, and
your inventory is $4.9 million. You have current liabilities of $19.3 million. What is the maximum dividend you could
pay (in cash and in stock) this year and still comply with your covenants?
The maximum dividend would be $ million (Round to one decimal place.)
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