Planetary Travel Co. has $197,000,000 in stockholders’ equity. Common stock is $40,000,000 and the balance is retained earnings. The firm has $265,000,000 in total assets and 2 percent of this value is in cash. Earnings for the year are $26,000,000 and are included in retained earnings.
a. What is the legal limit on current dividends? What is the practical limit based on liquidity? If the company pays out the amount in part b, what is the dividend payout ratio?