Phillips 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:

AssetsCash $401,000Accounts receivable804,000Fixed assets1,085,000Total assets$2,290,000Liabilities and Stockholders' EquityAccounts payable$536,000Long term payable297,000Common stock (320,000 shares at $1 par)320,000Retained earnings1,137,000Total liabilities and stockholders' equity$2,290,000

a-1.From a legal perspective, what is the maximum amount of dividends per share the firm could pay?

a-2.Is this realistic?

Yes No

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

c.Assume the firm earned an 16 percent return on stockholders' equity last year. If the board wishes to pay out 50 percent of earnings in the form of dividends, how much will dividends per share be?