Question

A company's board of directors votes to declare a cash dividend of $1.35 per share of common stock. The company has 27,000 shares authorized, 22,000 issued, and 21,500 shares outstanding. The total amount of the cash dividend is:

Answer 1

The total amount of the cash dividend that the company will pay out is $29,025, calculated by the dividend per share of $1.35 multiplied by the shares outstanding (21,500).

Step-by-step explanation:

When a company's board of directors votes to declare a cash dividend, they determine the distribution of percent of the profits to the shareholders. In this case, the total amount of the cash dividend that the company will pay out can be calculated by multiplying the dividend per share by the number of shares outstanding, as these are the shares held by all shareholders, excluding the shares held by the company itself (treasury shares).

The total cash dividend is thus: $1.35 (dividend per share) × 21,500 (shares outstanding) = $29,025.

It's important to note that the number of shares authorized or issued is not relevant in calculating dividends. Only the shares outstanding are used because these are the actual shares currently owned by investors that are entitled to dividends.