Philips 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 Assets Cash $ 312,500 Accounts receivable 800,000 Capital assets 987,500 Total assets $2,100,000 Liabilities and Shareholders ' Equity Accounts payable $ 445,000 Long term notes payable 280,000 Common stock (250,000 shares) 500,000 Retained earnings 875,000 Total liabilities and shareholders ' equity $2,100,000 a From a legal perspective, what is the maximum amount of dividends per share the firm could pay Is this realistic b In terms of cash availability, what is the maximum amount of dividends per share the firm could pay c Assume the firm earned a 16 percent return on shareholders ' equity If the board wishes to pay out 60 percent of earnings in the form of dividends, how much will dividends per share be

Question: Philips Rock and Mud is trying to determine the maximum amount of cash dividends it can pay this year. Assume its balance sheet is as

Philips 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:

Assets
Cash	$ 312,500
Accounts receivable.	800,000
Capital assets	987,500
Total assets.	$2,100,000
Liabilities and Shareholders' Equity
Accounts payable	$ 445,000
Long-term notes payable	280,000
Common stock (250,000 shares).	500,000
Retained earnings	875,000
Total liabilities and shareholders' equity.	$2,100,000

a. From a legal perspective, what is the maximum amount of dividends per share the firm could pay? Is this realistic?

b. In terms of cash availability, what is the maximum amount of dividends per share the firm could pay?

c. Assume the firm earned a 16 percent return on shareholders' equity. If the board wishes to pay out 60 percent of earnings in the form of dividends, how much will dividends per share be?

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