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# Amount of dividend

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A debt issue contains a dividend limitation. Cumulative dividends cannot exceed the sum of \$25 million and 60% of cumulative net income since the debt was issued three years ago. The firm earned \$50 million net income in each of those years. It paid total dividends of \$15 million and \$20 million the past two years and \$25 million so far this year. How large a dividend could the firm pay at the end of the third year without violating the dividend limitation?

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https://brainmass.com/business/accounting-for-corporations/amount-dividends-under-bond-covenant-370186

#### Solution Preview

The total amount of dividends that can be paid = 25 + 60% of cumulative ...

#### Solution Summary

The solution explains how to determine the maximum amount of dividends that can be paid under the bond covenant.

\$2.19