A firm has net income of $95,000. Dividends are $35,000. How much does the firm put...
- A firm has net income of $95,000. Dividends are $35,000.
- How much does the firm put in retained earnings?
-
- Give me three different scenarios in the above problem (A) (with funds going into retained earnings) that will make the balance sheet stay balanced. Please give dollar amounts.
- A firm has $900,000 in revenue. They are in the 34% tax bracket. Expenses (excluding interest) are $125,000 and Interest Expense is $50,000. Preferred dividends are $20,000.
A. What are the earnings available to common stockholders?
- Continuing from A: What is the increase to retained earnings for the year if the firm has 10,000 shares of common stock outstanding and declares a $1.15 dividend per share of common stock?
3. A firm has a beginning retained earnings balance of 550,000 and an ending of $750,000. The firm has revenue of $450,000 and expenses of $50,000. They are in the 34% tax bracket.
- Did they pay any dividends and if so how much?
- If they have 100,000 shares outstanding, what was the dividend per share?
Homework Answers
1) A. The amount that firm put in retained earnings = net income - dividend
= $95000 - $35000
= $60000
2) A.
| Revenue | 900000 |
| less:Expenses | 125000 |
| EBIT | 775000 |
| less: interest | 50000 |
| EBT | 725000 |
| less: Tax | 246500 |
| Net income | 478500 |
| less: Preferred dividend | 20000 |
| Earnings available to common stockholders | 458500 |
B.
| Earnings available to common stockholders | 458500 |
| less: cash Dividend to common stockholder ($1.15*10000) | 11500 |
| increase to retained earnings | 447000 |
3. A . yes Dividend was paid of $64000
| Beginning retained earnings | 550000 | |
| Revenue | 450000 | |
| less:expense | 50000 | |
| Earning before tax | 400000 | |
| less: Tax | 136000 | |
| Net income | 264000 | |
| less: Dividend | (64000) | |
| ending retained earnings | $750000 |
B. dividend per share = Dividend / shares outstanding
= $64000 / 100000
= $0.64 per share
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