Question: 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: AssetsCash$ 386,000Accounts receivable836,000Fixed assets 1,048,000 Total assets$2,270,000Liabilities and Stockholders' EquityAccounts payable$ 459,000Long term payable371,000Common stock (295,000 shares at $1 par)295,000Retained earnings 1,145,000 Total liabilities and stockholders' equity$2,270,000
a. From a legal perspective, what is the maximum amount of dividends per share the firm could pay?
b. In terms of cash availability, what is the maximum amount of dividends per share the firm could pay?
c. Assume the firm earned an 18 percent return on stockholders' equity last year. If the board wishes to pay out 50 percent of earnings in the form of dividends, how much will dividends per share be? (Round to two places to the right of the decimal point.) (Block 598) Block, Stanley, Geoffrey Hirt, Bartley Danielsen. Foundations of Financial Management, 16th Edition. McGraw-Hill Learning Solutions, 01/2016. VitalBook file. The citation provided is a guideline. Please check each citation for accuracy before use.