Principles of Managerial Finance (14th Edition) (Pearson Series in Finance)
14th Edition
ISBN: 9780133507690
Author: Lawrence J. Gitman, Chad J. Zutter
Publisher: PEARSON
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Question
Chapter 14, Problem 14.5P
a)
Summary Introduction
To determine: The cash dividend payable by the firm to common stockholders.
Introduction:
Dividend is the portion of earnings of the company distributed to the shareholders of the firm.
b)
Summary Introduction
To determine: The effects of cash dividend of $0.80 on the company balance sheet.
c)
Summary Introduction
To discuss: The key constraints with respect to magnitude of the firms dividend payment when the firm unable to raise the new funds from external sources.
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Dividend constraints A firm has $750,000 in paid-in capital, retained earnings of $38,000 (including the current year's earnings), and 25,000 shares of common stock
outstanding. In the current year, it has $28,000 of earnings available for the common stockholders.
ions
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 $0.96 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?
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.)
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Problem 1
Assume that ABC Corporation earns a net income of 10 million for the current period. The
corporation also needs Br 8 million for new investments for the next period. Suppose the target
capital structure of debt to equity ratio is one to three ratios. Based on this, determine the amount
of dividend to be paid based on the residual dividend policy?
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Chapter 14 Solutions
Principles of Managerial Finance (14th Edition) (Pearson Series in Finance)
Ch. 14.1 - What two ways can firms distribute cash to...Ch. 14.1 - Why do rapidly growing firms generally pay no...Ch. 14.1 - The dividend payout ratio equals dividends paid...Ch. 14.2 - Prob. 1FOPCh. 14.2 - Prob. 14.4RQCh. 14.2 - Prob. 14.5RQCh. 14.2 - Prob. 14.6RQCh. 14.3 - Does following the residual theory of dividends...Ch. 14.3 - Contrast the basic arguments about dividend policy...Ch. 14.4 - Prob. 14.9RQ
Ch. 14.5 - Describe a constant-payout-ratio dividend policy,...Ch. 14.6 - Why do firms issue stock dividends? Comment on the...Ch. 14.6 - Compare a stock split with a stock dividend.Ch. 14 - Prob. 1ORCh. 14 - Prob. 14.1STPCh. 14 - Prob. 14.1WUECh. 14 - Prob. 14.2WUECh. 14 - Prob. 14.3WUECh. 14 - Prob. 14.4WUECh. 14 - Prob. 14.5WUECh. 14 - Dividend payment procedures At the quarterly...Ch. 14 - Prob. 14.2PCh. 14 - Prob. 14.3PCh. 14 - Dividend constraints The Howe Companys...Ch. 14 - Prob. 14.5PCh. 14 - Prob. 14.6PCh. 14 - Prob. 14.7PCh. 14 - Prob. 14.8PCh. 14 - Stock dividend: Firm Columbia Paper has the...Ch. 14 - Cash versus stock dividend Milwaukee Tool has the...Ch. 14 - Stock dividend: Investor Sarah Warren currently...Ch. 14 - Stock dividend: Investor Security Data Company has...Ch. 14 - Stock split: Firm Growth Industries current...Ch. 14 - Prob. 14.14PCh. 14 - Stock split versus stock dividend: Firm Mammoth...Ch. 14 - Prob. 14.16PCh. 14 - Prob. 14.17PCh. 14 - Prob. 14.18PCh. 14 - Prob. 14.19P
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