Exam 17: Sharing Firm Wealth: Dividends, Share Repurchases, and Other Payouts

Brady inherited 500 shares of LNM, Inc. The stock is selling in the market for $92 per share and the company is contemplating a 5-for-3 stock split. Given this information, which of the following statements is correct?

Suppose a firm has a dividend payout ratio of 47 percent and net income of $7 million. What would be the annual addition to retained earnings?

Which of the following is the primary goal of a firm?

Which of the following statements is correct?

Which of the following is a policy of a firm paying out only funds that are left over after all positive NPV projects are funded?

Which of the following is described as a firm buying back shares of its own stock?

Which of the following would cause dividends to decrease if the firm was using the residual dividend model?

JAY Corp. is expected to pay a dividend of $5.00 per year indefinitely. If the appropriate rate of return on this stock is 13 percent per year, and the stock consistently goes ex-dividend 30 days before the dividend payment date, what will be the expected minimum price in light of the dividend payment logistics?

Which of the following argues that dividends that the firm has committed to pay are less risky to risk-averse investors than are potential future capital gains?

Which of the following is an exchange of existing shares for a different (usually larger) number of "new shares," with proportionately different par and market values?

Suppose a firm has a retention ratio of 35 percent and net income of $2 million. How much does it pay out in dividends?

Suppose a firm has a retention ratio of 33 percent and net income of $6.25 million. How much does it pay out in dividends?

Suppose a firm has a retention ratio of 85 percent and net income of $225 million. How much does it pay out in dividends?

Suppose a firm has a retention ratio of 55 percent and net income of $7 million. How much does it pay out in dividends?

For most investors, the equalization of the tax rates on capital gains and dividends did which of the following?

A firm has retained earnings of $11 million, a common shares account of $2 million, and additional paid-in-capital of $6 million, and the firm just paid a 5 percent stock dividend. Assume that fair market value is reflected in the relative size of both the common shares account and the additional paid-in-capital account. Which of the following statements is correct?

Suppose a firm has a retention ratio of 80 percent, net income of $10 million, and 2 million shares outstanding. What would be the dividend per share paid out on the firm's stock?

Choc Hut, Inc. normally pays a annual dividend. The last such dividend paid was $1.50, all future annual dividends are expected to grow at 6 percent, and the firm faces a required rate of return on equity of 18 percent. If the firm just announced that the next dividend will be an extraordinary dividend of $5.00 per share that is not expected to affect any other future dividends, what should the stock price be?

When does a dividend become a firm obligation?

The first day that the shares will trade without the dividend attached is referred to as the: