Please help with the below problem Show equations Problem 14 8 Dividend constraints A firm has $800,000 in paid in capital, retained earnings of $40,000 (including the current years earnings), and 25,000 shares of common stock outstanding In the current year, it has $29,000 of earnings a What is the most the firm can pay in cash dividends to each common stockholder (Assume that legal capital includes all paid in capital ) b How would an $0 80 share dividend effect the firms balance sheet c If the firm cannot raise new external funds, what do you consider the key constraint with respect to the magnitude of the firms dividend payments Why Solution a What is the most the firm can pay in cash dividends to each common stockholder (Assume that legal capital includes all paid in capital ) Retained Earnings of shares outstanding Maximum Dividend b How would an $0 80 share dividend effect the firms balance sheet c If the firm cannot raise new external funds, what do you consider the key constraint with respect to the magnitude of the firms dividend payments Why

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Question: Please help with the below problem. Show equations. Problem 14-8 Dividend constraints. A firm has $800,000 in paid-in capital, retained earnings of $40,000 (including the

Please help with the below problem. Show equations.

Problem 14-8

Dividend constraints. A firm has $800,000 in paid-in capital, retained earnings of $40,000 (including the current years earnings), and 25,000 shares of common stock outstanding. In the current year, it has $29,000 of earnings.
a.	What is the most the firm can pay in cash dividends to each common stockholder? (Assume that legal capital includes all paid-in capital.)
b.	How would an $0.80/share dividend effect the firms balance sheet?
c.	If the firm cannot raise new external funds, what do you consider the key constraint with respect to the magnitude of the firms dividend payments? Why?

Solution

a.	What is the most the firm can pay in cash dividends to each common stockholder? (Assume that legal capital includes all paid-in capital.)

	Retained Earnings /
	# of shares outstanding
	Maximum Dividend =

b.	How would an $0.80/share dividend effect the firms balance sheet?



c.	If the firm cannot raise new external funds, what do you consider the key constraint with respect to the magnitude of the firms dividend payments? Why?

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