Question

Hurricane Industries had a net income of $141,150 and paid 35 percent of this amount to shareholders in dividends. During the year, the company sold $87,750 in new common stock. What was the company's cash flow to stockholders?

Answer 1

Answer:

$38,347

Explanation:

Calculation for Hurricane Industries cash flow to stockholders

Formula for Cash flow to stockholders:

Cash flow to stockholders = Dividends paid - Net new equity raised

Let plug in the formula

Where:

Dividends paid =$141,150

Net new equity raised=$87,750

Hence:

Dividends = $141,150 * .35= $49,403

New net equity = $87,750

Cash flow to stockholders = $87,750-$49,403

= $38,347

Therefore the company's cash flow to stockholders will be $38,347