In: Finance
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.)
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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.)
|
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 ***
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