## Related questions with answers

Dividend constraints The Howe Company's stockholders' equity account follows:

$\begin{array}{lr}\text { Common stock (400,000 shares at } \$ 4 \text { par) } & \$ 1,600,000 \\ \text { Paid-in capital in excess of par } & 1,000,000 \\ \text { Retained earnings } & \dfrac{1,900,000}\\ \\ \text { Total stockholders' equity } &{\$ 4,500,000} \\ \end{array}$

The earnings available for common stockholders from this period's operations are $100,000, which have been included as part of the$1.9 million retained earnings.

b. If the firm has $160,000 in cash, what is the largest per-share dividend it can pay without borrowing?

Solutions

VerifiedIn this part of the exercise, we are required to the maximum dividend-per-share value that The Howe Company can issue if we know the amount of cash, the fact that there will be no borrowing, and the type of legal capital predefined.

In this problem, we are asked to calculate Howe Company’s largest dividend per share it can pay to its shareholders without borrowing, considering the firm has a $160,000 in cash.

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