What is the practical limit based on liquidity

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Planetary Travel Co. has $125,000,000 in stockholders’ equity. Common stock is $40,000,000 and the balance is retained earnings. The firm has $250,000,000 in total assets and 3 percent of this value is in cash. Earnings for the year are $29,000,000 and are included in retained earnings.

a. What is the legal limit on current dividends? (Do not round intermediate calculations. Input your answer in dollars, not millions (e.g., $1,234,000).)

Legal Limit on current dividends____

b. What is the practical limit based on liquidity? (Do not round intermediate calculations. Input your answer in dollars, not millions (e.g., $1,234,000).)

Practical Limit on Current Dividends _____

c. If the company pays out the amount in part b, what is the dividend payout ratio? (Do not round intermediate calculations. Input your answer as a percent rounded to 2 decimal places.)

Payout ratio____

Reference no: EM131937388

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