Hurricane Industries had a net income of $122,750 and paid 30 percent of this amount to shareholders in dividends. During the year, the company sold $75,750 in new common stock. What was the company's cash flow to stockholders?Group of answer choices$47,000−$36,825$38,925$36,825−$38,925
Question
Hurricane Industries had a net income of 75,750 in new common stock. What was the company's cash flow to stockholders?Group of answer choices36,82536,825−$38,925
Solution
First, we need to calculate the amount of dividends paid to shareholders. This is 30 percent of the net income, so:
Dividends = 36,825
Next, we need to calculate the cash flow to stockholders. This is the dividends paid minus the new common stock sold, so:
Cash Flow to Stockholders = Dividends - New Common Stock Sold Cash Flow to Stockholders = 75,750 = -$38,925
So, the company's cash flow to stockholders is -$38,925.
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