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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 122,750andpaid30percentofthisamounttoshareholdersindividends.Duringtheyear,thecompanysold122,750 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 choices47,00047,000−36,82538,92538,92536,825−$38,925

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Solution

First, we need to calculate the amount of dividends paid to shareholders. This is 30 percent of the net income, so:

Dividends = 122,7500.30=122,750 * 0.30 = 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 = 36,82536,825 - 75,750 = -$38,925

So, the company's cash flow to stockholders is -$38,925.

This problem has been solved

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