Exam 185: Dividend Policy

According to Miller and Modigliani, it is ____ that really determines a firm's value.

Peterson Company expects earnings per share and dividends per share to be $4.50 and $2.50, respectively, next year. Peterson currently has 5,000,000 shares of common stock outstanding. The company's capital budget for next year is projected to be $25,000,000. Peterson plans to maintain its present debt ratio (debt to total assets) at 40% next year. (Assume that Peterson's capital structure includes only common equity and debt and that these will be the only sources of funds to finance capital budgeting projects next year.) Determine how much external equity the company must raise to finance its capital budget.

Heintz Corp. has just declared a 10% stock dividend. The company's pre-stock dividend common stockholders' equity was as follows: Common stock ( \ 0.50 par, 10,000,000 shares) \ 5,000,000 Contributed capital in excess of par \ 48,000,000 Retained earnings \ 97,500,000 Total common stockholders' equity \1 50,500,000 ? If the common stock of Heintz was selling at $32 a share prior to the stock dividend, what will the retained earnings be after the stock dividend is distributed?

A dividend method that many tech companies favor in order to have more tax efficiency, boost earnings per share and signal that the company has more productive uses for its cash than paying dividends is ____.

Which of the following is not a dividend policy?

A foreign subsidiary with good access to capital within the host country tends to pay ____ dividends to the parent than subsidiaries with poor access to local capital.

Which of the following is not an argument for the relevance of dividends?

Which of the following would be considered an alternative dividend policy? I. Passive residual approach II. Increasing dollar dividend approach

A passive residual dividend policy suggests that the firm will ____.

Urguhart has just declared a 4 for 3 stock split. If the pre-split price of common stock was $54 a share, what do you expect the post-split price will be?

The passive residual dividend policy seems to be inconsistent with a ____.

The Wagner Company tries to follow a pure "residual" dividend policy. Earnings and dividends last year were $100 million and $20 million, respectively. Anticipated earnings for this year are $80 million. The company is financed completely with common equity. The required rate of return on retained earnings is 15% while the cost of new equity is 16%. Assuming Wagner has $90 million of investment projects having expected returns greater than 16%, determine Wagner's dividend and investment policies.

Excelsior Company's capital structure is as follows: Common stock ( \ 2 par value, 2,000,000 shares) \ 4,000,000 Contributed capital in excess of par 16,000,000 Retained earnings 23,000,000 Total common stockholders' equity \4 3,000,000 ? The current market price of the firm's common stock is $30. Assuming the firm declares a 10% stock dividend, determine the balance in the contributed capital in excess of par and retained earnings accounts.

Metromat has the following equity accounts on its balance sheet: Common stock ( \ 2 par, 2.4 million shares) 800,000 Contributed capital in excess of par 33,600,000 Retained earnings 134,400,000 Total common stockholders' equity \1 72,800,000 ? The current market price of Metromat's shares is $16. If the firm declares a 15% stock dividend and a $0.15 per share cash dividend, what will be the impact on contributed capital in excess of par? Assume a marginal tax rate of 40%.

In a large, widely held corporation, the financial manager should consider all of the following in establishing a dividend policy EXCEPT ____.

Cycle Out has 1,000,000 shares outstanding and currently has annual earnings per share of $5.20. If Cycle's stock price is $62.40, what would be the expected stock price if Cycle repurchases 50,000 shares?

The Percolator Company has the following capital structure: ? Common stock ( \ 5 par, 250,000 shares) \ 1,250,000 Contributed capital in excess of par \ 5,000,000 Retained earnings \ 4,000,000 ?The company declares a 10% stock dividend. The pre-stock dividend market price of the company's stock is $50. Determine the balance in the common stock account after the stock dividend.

The dividend clientele effect concept was originally developed by ____.

A firm that employs a constant payout ratio dividend policy pays ____.

In the theoretical world of Miller and Modigliani, ____.