Exam 14: Distributions to Shareholders: Dividends and Repurchases

The projected capital budget of Kandell Corporation is $1,000,000,its target capital structure is 60% debt and 40% equity,and its forecasted net income is $550,000.If the company follows a residual dividend policy,what total dividends,if any,will it pay out?

Poff Industries' stock currently sells for $120 a share.You own 100 shares of the stock.The company is contemplating a 2-for-1 stock split.Which of the following best describes what your position will be after such a split takes place?

Last week,Weschler Paint Corp.completed a 3-for-1 stock split.Immediately prior to the split,its stock sold for $150 per share.The firm's total market value was unchanged by the split.Other things held constant,what is the best estimate of the stock's post-split price?

McCann Publishing has a target capital structure of 35% debt and 65% equity.This year's capital budget is $850,000 and it wants to pay a dividend of $400,000.If the company follows a residual dividend policy,how much net income must it earn to meet its capital budgeting requirements and pay the dividend,all while keeping its capital structure in balance?

Which of the following statements about dividend policies is correct?

Which of the following statements is correct?

MM's dividend irrelevance theory says that while dividend policy does not affect a firm's value,it can affect the cost of capital.

The following data apply to Garber Industries,Inc.(GII): Value of operations               $\$ 1,000$ Short-term investments             $\$ 100$ Debt                         $\$ 300$ Number of shares                 $100$ The company plans on distributing $50 million as dividend payments.What will the intrinsic per share stock price be immediately after the distribution?

Getler Inc.'s projected capital budget is $2,000,000,its target capital structure is 40% debt and 60% equity,and its forecasted net income is $1,000,000.If the company follows a residual dividend policy,how much dividends will it pay or,alternatively,how much new stock must it issue? Dividends Stock Issued

The capital budget of Creative Ventures Inc.is $1,000,000.The company wants to maintain a target capital structure that is 30% debt and 70% equity.The company forecasts that its net income this year will be $800,000.If the company follows a residual dividend policy,what will be its total dividend payment?

Downie Foods recently completed a 4-for-1 stock split.Prior to the split,its stock sold for $120 per share.If the firm's total market value increased by 5% as a result of increased liquidity caused by the split,what was the stock price following the split?

Which of the following would be most likely to lead to a decrease in a firm's dividend payout ratio?

David Rose Inc.forecasts a capital budget of $500,000 next year with forecasted net income of $400,000.The company wants to maintain a target capital structure of 30% debt and 70% equity.If the company follows the residual dividend policy,how much in dividends,if any,will it pay?

Which of the following actions will best enable a company to raise additional equity capital?

In the real world,dividends

If a firm adopts a residual distribution policy,distributions are determined as a residual after funding the capital budget.Therefore,the better the firm's investment opportunities,the lower its payout ratio should be.

Myron Gordon and John Lintner believe that the required return on equity increases as the dividend payout ratio is decreased.Their argument is based on the assumption that

Which of the following statements is correct?

Grandin Inc.is evaluating its dividend policy.It has a capital budget of $625,000,and it wants to maintain a target capital structure of 60% debt and 40% equity.The company forecasts a net income of $475,000.If it follows the residual dividend policy,what is its forecasted dividend payout ratio?

If the shape of the curve depicting a firm's WACC versus its debt ratio is more like a sharp "V",as opposed to a shallow "U",it will be easier for the firm to maintain a steady dividend in the face of varying investment opportunities or earnings from year to year.