Dividends

| December 3, 2015

Jane’s Wigs Inc. had the following balance sheet last year:

Jane has just invented a non-slip wig for men which she expects will cause sales to triple from $10,000 to $30,000, increasing net income to $1,000. She feels that she can handle the increase without adding any fixed assets. (1) Will Jane need any outside capital if she pays out 20% of net income as dividends dividends? (2) If so, how much?
Select one:
A. Yes; $9,700
B. Yes; $2,600
C. Yes; $2,900
D. No; there will be a $2,400 surplus.
E. Yes; $3,200

Jane’s Wigs Inc. had the following balance sheet last year:

Jane has just invented a non-slip wig for men which she expects will cause sales to triple from $10,000 to $30,000, increasing net income to $1,000. She feels that she can handle the increase without adding any fixed assets. (1) Will Jane need any outside capital if she pays out 70% of net income as dividends dividends? (2) If so, how much?
Select one:
A. Yes; $9,700
B. Yes; $2,900
C. Yes; $3,100
D. No; there will be a $2,400 surplus.
E. Yes; $3,200

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