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How much of a per-share dividend could ashkenazi pay

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Reference no: EM132566029

Ashkenazi Companies has ten million shares outstanding, generates free cash flows of RM 60 million each year and has a cost of capital of 10%. It also has RM 40 million of cash on hand. Ashkenazi wants to decide whether repurchase stock or invest the cash in a that generates free cash flows of RM 2 million each year. Should Ashkenazi invest or repurchase shares?

Ashkenazi Companies has following stockholders' equity account:

Common stock (350,000 shares at $3 par)------------$1,050,000

Paid-in capital in excess of par --------------------------2,500,000

Retaining earnings-------------------------------------------750,000

Total stockholders' equity--------------------------$4,300,000

Assuming that state laws define legal capital solely as the par value of common stock, how much of a per-share dividend can Ashkenazi pay? If legal capital were more broadly defined to include all paid-in capital, how much of a per-share dividend could Ashkenazi pay?

Reference no: EM132566029

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