planetary travel co has $240,000,000 in stockholders equity. Eighty million doll
ID: 2639267 • Letter: P
Question
planetary travel co has $240,000,000 in stockholders equity. Eighty million dollars is listed as common stock and the balance is in retained earnings. the firm has $500,000,000 in total assets and 2 percent of this value is in cash. earnings for the year are $40,000,000 and are included in retained earnings. a.)what is the legal limit on current dividends? b.)What is the practical limit based on liquidity? c.)if the company pays ot the amount in part b what is the dividend payout ratio?(compute this based on total dollars rather than on a per share basis because the number of shares is not given.)
Explanation / Answer
Firm have the cash of 2% of $5,000,000 in its assets. The maximum amount that the firm can pay as the dividend is the cash available in the firm.
Calculate the cash available in the firm:
total cash = 0.02 x 500000000 = 10000000
Therefore, option (B) is a correct answer as the maximum amount that the firm can pay as the dividend is $10000000
Related Questions
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.