Exam 17: Dividends and Payout Policy

Aaron owns 1,600 shares of LP Gas stock which he purchased six years ago at a price of $18 a share. Today, these shares are selling for $26 each. Assume a tax rate of 20 percent applies to both dividend income and capital gains received by individuals. Ignore costs. Given this hypothetical assumption, from Aaron's point of view a stock repurchase today would:

As of 2018, the maximum tax rate any individual would pay on dividend income is:

Bailey's decided on Friday, March 7, to pay a dividend of $.28 a share on Monday, April 7. The ex-dividend date is Tuesday, March 18. What is the date of record?

Which one of the following statements related to stock repurchases is correct?

Alta Gems stock is currently trading at $36 a share. The company believes its primary clientele can afford to spend between $2,000 and $2,500 to purchase a round lot of 100 shares. This company should consider a:

You own 900 shares of Dell Hardware. The company plans on issuing a dividend of $1.98 a share one year from now and then issuing a final liquidating dividend of $11.32 a share after one additional year. Your required rate of return on this security is 16.5 percent. Ignoring taxes, what is the value of one share of this stock to you today?

Revol-Tech is a technology company with excellent growth prospects. The company wishes to do something to acknowledge the loyalty of its shareholders but needs all of its available cash to fund its rapid growth. The market price of the stock is currently trading at the upper end of its preferred trading range. The company is most apt to consider which one of the following in this situation?

The Tanning Bed has 8,500 shares of stock outstanding with a par value of $1 per share and a market value of $12 per share. The balance sheet shows $34,200 in the capital in excess of par account, and $51,300 in the retained earnings account. The firm just announced a 100 percent stock dividend. What will be the value of the common stock account after the dividend?

The Green Fiddle has declared a dividend of $2.60 per share. Suppose capital gains are not taxed but dividends are taxed at 15 percent. New IRS regulations require that taxes be withheld at the time the dividend is paid. Green Fiddle stock closed at $36.80 per share today and the stock goes ex dividend tomorrow. What will be the ex-dividend price?

Which one of the following is a result of a small stock dividend?

Ma's Fried Chicken has 21,000 shares of stock outstanding with a par value of $1 per share and a market value of $41 per share. The balance sheet shows $121,000 in the capital in excess of par account and $204,000 in the retained earnings account. The firm just announced a 5 percent stock dividend. What will be the total owners' equity after the dividend?

You own 400 shares of stock in A-Z Tours. The company plans to pay a dividend of $.65 in Year 1 and a final liquidating dividend of $28.50 per share in Year 2. The required return is 15.6 percent. If you only want $200 total in dividends in the first year, what will be your homemade dividend in the second year?

Delaware Trust has 2,400 shares of common stock outstanding at a market price per share of $63. Currently, the firm has excess cash of $3,500, total assets of $728,900, and net income of $41,320. The firm has decided to pay out all of its excess cash as a cash dividend. What will the earnings per share be after this dividend is paid?

The market value balance sheet for Apple Pie Corp. reflects cash of $42,000, fixed assets of $319,000, and equity of $237,000. There are 7,500 shares of stock outstanding with a par value of $1 per share. The company has declared a dividend of $1.03 per share. The stock goes ex dividend tomorrow. Ignore any tax effects. What will be the price of the stock tomorrow morning?

A large stock dividend:

A $.45 quarterly cash payment paid by Jones & Co. to its shareholders in the normal course of business becomes a liability of the company on the:

The board of directors of Wilson Sporting Equipment met this afternoon and passed a resolution to pay a cash dividend of $.42 a share next month. In relation to this dividend, today is referred to as which one of the following dates?

A stock repurchase program:

The Peanut Shack has 3,500 shares of stock outstanding with a par value of $1 per share. The current market value of the firm is $178,200. The company just announced a stock split of seven-for-three. What will be the market price per share after the split?

Automatic dividend reinvestment plans: