Phillips Rock and Mud is trying to determine the maximum amount of cash dividends it can...

Phillips Rock and Mud is trying to determine the maximum amount of cash dividends it can pay this year. Assume its balance sheet is as follows:


Assets
Cash	$	410,000
Accounts receivable		806,000
Fixed assets		1,007,000

Total assets	$	2,223,000

Liabilities and Stockholders' Equity
Accounts payable	$	542,000
Long term payable		307,000
Common stock (305,000 shares at $2 par)		610,000
Retained earnings		764,000

Total liabilities and stockholders' equity	$	2,223,000

a-1. From a legal perspective, what is the maximum amount of dividends per share the firm could pay? (Do not round intermediate calculations and round your answer to 2 decimal places.)

Dividends per share

$2.50

a-2. Is this realistic?

	Yes
X	No

b. In terms of cash availability, what is the maximum amount of dividends per share the firm could pay? (Do not round intermediate calculations and round your answer to 2 decimal places.)

Dividends per share

$1.34

c. Assume the firm earned an 15 percent return on stockholders’ equity last year. If the board wishes to pay out 40 percent of earnings in the form of dividends, how much will dividends per share be? (Do not round intermediate calculations and round your answer to 2 decimal places.)

*** Need answer to this portion only ***

Dividends per share : $

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Expert Solution

jeff jeffy answered 8 months ago

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