How can their objective be achieved

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Question - Gorbals Ltd. made a net profit of $100,000. The Company's equity consists of $700,000 in common shares and $200,000 in 8% preference shares. The directors are considering issuing a dividend. They are aware that the company will have to pay the preference share dividend first, but they then want to pay a dividend of $25,000 to themselves, who are holders of half the common shares, and only $10,000 to the remaining shareholders, who are outsiders.

Required -

(a) Can they legally do so?

(b) If not, how can their objective be achieved?

Reference no: EM133024166

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