Question

Hurricane Industries had a net income of $143,450 and paid 45 percent of this amount to shareholders in dividends. During the year, the company sold $89,250 in new common stock. What was the company's cash flow to stockholders?

Answer 1

(-$24,697)

Step-by-step explanation:

Given that,

Net income = $143,450

Dividend payout ratio = 45 percent

company sold $89,250 in new common stock

Total dividend:

= Net income × Dividend payout ratio

= $143,450 × 0.45

= $64,553

Therefore,

Company's cash flow to stockholders:

= Total Dividend - Net new equity raised

= $64,553 - $89,250

= (-$24,697)