Dividend constraints The stockholders' equity account of Plastic Enterprises is as follows:

Common stock (280,000 shares at $3.50 par) $980,000

Paid-in capital in excess of par 900,000

Retained earnings 1,200,000

Total stockholders' equity $3,080,000

The earnings available for the common stockholders are $280,000 and are included in the $1,200,000 retained earnings.

a. Calculate the maximum dividend per share that the firm can pay if the legal

capital includes all paid-in capital.

b. Calculate the maximum dividend per share that the firm can pay if the legal

capital includes only the value of the common stock.

c. If Plastic Enterprises has $25,000 in cash, what is the largest per-share dividend

the firm can pay without borrowing, assuming legal capital includes all paid-in

capital?

d. What is the purpose of capital impairment restrictions when developing a

dividend policy?