A firm has $400 million of assets that includes $50 million of cash and 10 million shares outstanding.The firm uses $40 million of its cash to pay dividends.If an investor has 1000 shares,how many shares must she sell to create a homemade dividend of $4900.
A)25 shares
B)30 shares
C)35 shares
D)40 shares

Question

Quizplus · Accepted Answer

The investor has 1000 shares and wants to create a homemade dividend of $4900. The firm has $40 million of assets that includes $50 million of cash and 10 million shares outstanding. The firm uses $40 million of its cash to pay dividends. So, the dividend per share is $40 million / 10 million shares = $4 per share. To create a homemade dividend of $4900, the investor must sell 4900 / 4 = 1225 shares.

A Firm Has $400 Million of Assets That Includes $50