Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

need help quickly, will like! thnx Your firm successfully issued new debt last year, but the debt carries covenants. Specifically, you can only pay dividends

need help quickly, will like! thnx
image text in transcribed
Your firm successfully issued new debt last year, but the debt carries covenants. Specifically, you can only pay dividends out of earnings made after the debt issue and you must maintain a minimum quick (acid-test) ratio (Current Assets - Inventory)/Current Liabilities of 12. Your net income this year was $70.3 million. Your cash is $10.3 million, your receivables are $7.9 million, and your inventory is $4.9 million. You have current liabilities of $19.3 million. What is the maximum dividend you could pay (in cash and in stock) this year and still comply with your covenants? The maximum dividend would be $ million. (Round to one decimal place.)

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Economics And Personal Finance

Authors: Irvin Tucker, Joan Ryan

1st Edition

1133562108, 978-1133562108

More Books

Students also viewed these Finance questions