Question 1

The ex-dividend date is defined as _____ day(s) before the date of record.

Accepted Answer

A) three business 
B) three 
C) two business 
D) two 
E) one 
A) three business 
B) three 
C) two business 
D) two 
E) one

Question 2

Innovative Technologies has 46,000 shares of stock outstanding at a market price of $6 a share.Which one of the following stock splits should the firm declare if it wants to increase the stock price to exactly $16 a share? Ignore any taxes or market imperfections.

Accepted Answer

A) 5-for-2 stock split 
B) 3-for-1 stock split 
C) 1-for-3-reverse stock split 
D) 2-for-5 reverse stock split 
E) 3-for-8 reverse stock split 
A) 5-for-2 stock split 
B) 3-for-1 stock split 
C) 1-for-3-reverse stock split 
D) 2-for-5 reverse stock split 
E) 3-for-8 reverse stock split

Question 3

Assume that satisfied clienteles exist.Given this assumption, which one of these statements is correct?

Accepted Answer

A) A firm can increase its share price by increasing its dividend payout. 
B) Dividend policy is irrelevant as long as each clientele group remains satisfied. 
C) All firms will adopt a high-dividend-payout policy. 
D) All dividends become irrelevant. 
E) All firms should adopt a low-dividend-payout policy. 
A) A firm can increase its share price by increasing its dividend payout. 
B) Dividend policy is irrelevant as long as each clientele group remains satisfied. 
C) All firms will adopt a high-dividend-payout policy. 
D) All dividends become irrelevant. 
E) All firms should adopt a low-dividend-payout policy.

Question 4

The equity section of a firm's market value balance sheet has common stock of $250,000 (par value $1); capital surplus of $145,650; and retained earnings of $624,250.The firm's stock sells for $27 a share.If the firm repurchases $75,000 of stock, what will be the new market value of the firm's total equity?

Accepted Answer

A) $949,471 
B) $979,350 
C) $999,900 
D) $999,046 
E) $945,900 
A) $949,471 
B) $979,350 
C) $999,900 
D) $999,046 
E) $945,900

Question 5

Which one of the following is basically equivalent to a 2-for-1 stock split?

Accepted Answer

A) 20 percent stock dividend 
B) 25 percent stock dividend 
C) 50 percent stock dividend 
D) 100 percent stock dividend 
E) 200 percent stock dividend 
A) 20 percent stock dividend 
B) 25 percent stock dividend 
C) 50 percent stock dividend 
D) 100 percent stock dividend 
E) 200 percent stock dividend

Question 6

During the past year, ABC stock has sold for as little as $19 a share and a much as $33 a share.Which one of the following terms applies to these prices?

Accepted Answer

A) Benchmark values 
B) Price splits 
C) Price dividers 
D) Split range 
E) Trading range 
A) Benchmark values 
B) Price splits 
C) Price dividers 
D) Split range 
E) Trading range

Question 7

Assume there are no taxes or imperfections.Given this assumption, which one of the following statements is correct?

Accepted Answer

A) A cash dividend has no effect on the market price of the payer's stock. 
B) A cash dividend decreases shareholder wealth. 
C) Stock repurchases decrease the market value per share. 
D) Both a cash dividend and a share repurchase increase a firm's PE ratio. 
E) A stock repurchase has the same effect on a firm's market value balance sheet as does a cash dividend. 
A) A cash dividend has no effect on the market price of the payer's stock. 
B) A cash dividend decreases shareholder wealth. 
C) Stock repurchases decrease the market value per share. 
D) Both a cash dividend and a share repurchase increase a firm's PE ratio. 
E) A stock repurchase has the same effect on a firm's market value balance sheet as does a cash dividend.

Question 8

Which statement is correct?

Accepted Answer

A) Stock dividends tend to reduce agency costs related to shareholders but stock repurchases do not. 
B) It is relatively easy to determine whether or not a firm has completed a planned stock repurchase. 
C) Fixed stock repurchases allow managers to repurchase shares only when they feel those shares are undervalued. 
D) Stock dividends may come at the expense of forgoing positive net present value projects. 
E) Stock repurchases send the exact same signals to investors as cash dividends send. 
A) Stock dividends tend to reduce agency costs related to shareholders but stock repurchases do not. 
B) It is relatively easy to determine whether or not a firm has completed a planned stock repurchase. 
C) Fixed stock repurchases allow managers to repurchase shares only when they feel those shares are undervalued. 
D) Stock dividends may come at the expense of forgoing positive net present value projects. 
E) Stock repurchases send the exact same signals to investors as cash dividends send.

Question 9

Assume an all-equity firm has positive net income.If this firm pays a cash dividend the:

Accepted Answer

A) number of shares outstanding will increase. 
B) earnings per share will decrease. 
C) firm's total assets will remain constant. 
D) price-earnings ratio will decrease. 
E) firm's total equity will increase. 
A) number of shares outstanding will increase. 
B) earnings per share will decrease. 
C) firm's total assets will remain constant. 
D) price-earnings ratio will decrease. 
E) firm's total equity will increase.

Question 10

Which one of the following is a drawback of cash dividends?

Accepted Answer

A) Firms may have to obtain additional external financing which would not be required in the absence of the dividends. 
B) Stock prices tend to increase as annual dividend amounts increase. 
C) Cash dividends support stock prices. 
D) Dividends tend to lower agency costs. 
E) Dividend-paying firms tend to attract a wider field of investors than do non-dividend-paying firms. 
A) Firms may have to obtain additional external financing which would not be required in the absence of the dividends. 
B) Stock prices tend to increase as annual dividend amounts increase. 
C) Cash dividends support stock prices. 
D) Dividends tend to lower agency costs. 
E) Dividend-paying firms tend to attract a wider field of investors than do non-dividend-paying firms.

Question 11

Tuesday, December 1, is the ex-dividend date for Alpha stock.Which one of the following dates is the record date? Assume there are no banking holidays to consider.

Accepted Answer

A) Friday, November 27 
B) Monday, November 30 
C) Wednesday, December 2 
D) Thursday, December 3 
E) Friday, December 4 
A) Friday, November 27 
B) Monday, November 30 
C) Wednesday, December 2 
D) Thursday, December 3 
E) Friday, December 4

Question 12

Your portfolio is 500 shares of Country Marine Parts that currently sells for $33 a share.The company has announced a cash dividend of $0.75 per share with an ex-dividend date of tomorrow.Assume there are no taxes.What should you expect your portfolio value to be tomorrow morning assuming all else is held constant?

Accepted Answer

A) $16,236 
B) $16,500 
C) $16,646 
D) $16,764 
E) $16,830 
A) $16,236 
B) $16,500 
C) $16,646 
D) $16,764 
E) $16,830

Question 13

The equity section of a firm's market value balance sheet has common stock of $100,000 (par value $1); capital surplus of $125,450; and retained earnings of $427,500.The firm's stock sells for $36 a share.If the firm repurchases $55,000 of stock, what will be the new market value of the firm's total equity?

Accepted Answer

A) $582,521 
B) $612,400 
C) $632,950 
D) $632,096 
E) $597,950 
A) $582,521 
B) $612,400 
C) $632,950 
D) $632,096 
E) $597,950

Question 14

Oak Tree Farms has common stock outstanding at a price of $13 a share.The total market value of the equity is $435,000.How many shares of stock will be outstanding if the firm does a reverse stock split of 2-for-5?

Accepted Answer

A) 9,602 shares 
B) 36,000 shares 
C) 13,385 shares 
D) 37,500 shares 
E) 83,654 shares 
A) 9,602 shares 
B) 36,000 shares 
C) 13,385 shares 
D) 37,500 shares 
E) 83,654 shares

Question 15

Which one of the following events must occur before a firm can offer a liquidating dividend?

Accepted Answer

A) Bankruptcy filing 
B) Insolvency declaration 
C) Asset sale 
D) Negative equity 
E) Failed bond issue 
A) Bankruptcy filing 
B) Insolvency declaration 
C) Asset sale 
D) Negative equity 
E) Failed bond issue

Question 16

Which one of these favors a high-dividend payout?

Accepted Answer

A) Low transaction costs on stock trades 
B) Lower taxes on capital gains than on dividends 
C) Tax deferment on capital gains, but not on dividend income 
D) Flotation costs 
E) Corporate shareholders 
A) Low transaction costs on stock trades 
B) Lower taxes on capital gains than on dividends 
C) Tax deferment on capital gains, but not on dividend income 
D) Flotation costs 
E) Corporate shareholders

The ex-dividend date is defined as _____ day(s) before the date of record.

Innovative Technologies has 46,000 shares of stock outstanding at a market price of $6 a share.Which one of the following stock splits should the firm declare if it wants to increase the stock price to exactly $16 a share? Ignore any taxes or market imperfections.

Assume that satisfied clienteles exist.Given this assumption, which one of these statements is correct?

Which one of the following is basically equivalent to a 2-for-1 stock split?

During the past year, ABC stock has sold for as little as $19 a share and a much as $33 a share.Which one of the following terms applies to these prices?

Assume there are no taxes or imperfections.Given this assumption, which one of the following statements is correct?

Which statement is correct?

Assume an all-equity firm has positive net income.If this firm pays a cash dividend the:

Which one of the following is a drawback of cash dividends?

Tuesday, December 1, is the ex-dividend date for Alpha stock.Which one of the following dates is the record date? Assume there are no banking holidays to consider.

Oak Tree Farms has common stock outstanding at a price of $13 a share.The total market value of the equity is $435,000.How many shares of stock will be outstanding if the firm does a reverse stock split of 2-for-5?

Which one of the following events must occur before a firm can offer a liquidating dividend?

Which one of these favors a high-dividend payout?

Introduction to Financial Management

Financial Statements, Taxes, and Cash Flow

Working With Financial Statements

Introduction to Valuation: the Time Value of Money

Discounted Cash Flow Valuation

Interest Rates and Bond Valuation

Equity Markets and Stock Valuation

Net Present Value and Other Investment Criteria

Making Capital Investment Decisions

Some Lessons From Capital Market History

Risk and Return

Cost of Capital

Leverage and Capital Structure

Raising Capital

Short-Term Financial Planning

Working Capital Management

International Aspects of Financial Management

Filters

Exam 14: Dividends and Dividend Policy

The ex-dividend date is defined as _____ day(s) before the date of record.

Innovative Technologies has 46,000 shares of stock outstanding at a market price of $6 a share.Which one of the following stock splits should the firm declare if it wants to increase the stock price to exactly $16 a share? Ignore any taxes or market imperfections.

Assume that satisfied clienteles exist.Given this assumption, which one of these statements is correct?

Which one of the following is basically equivalent to a 2-for-1 stock split?

During the past year, ABC stock has sold for as little as $19 a share and a much as $33 a share.Which one of the following terms applies to these prices?

Assume there are no taxes or imperfections.Given this assumption, which one of the following statements is correct?

Which statement is correct?

Assume an all-equity firm has positive net income.If this firm pays a cash dividend the:

Which one of the following is a drawback of cash dividends?

Tuesday, December 1, is the ex-dividend date for Alpha stock.Which one of the following dates is the record date? Assume there are no banking holidays to consider.

Oak Tree Farms has common stock outstanding at a price of $13 a share.The total market value of the equity is $435,000.How many shares of stock will be outstanding if the firm does a reverse stock split of 2-for-5?

Which one of the following events must occur before a firm can offer a liquidating dividend?

Which one of these favors a high-dividend payout?

Introduction to Financial Management

Financial Statements, Taxes, and Cash Flow

Working With Financial Statements

Introduction to Valuation: the Time Value of Money

Discounted Cash Flow Valuation

Interest Rates and Bond Valuation

Equity Markets and Stock Valuation

Net Present Value and Other Investment Criteria

Making Capital Investment Decisions

Some Lessons From Capital Market History

Risk and Return

Cost of Capital

Leverage and Capital Structure

Raising Capital

Short-Term Financial Planning

Working Capital Management

International Aspects of Financial Management

Filters