Exam 15: Dividend Policy

Concin has the following equity accounts on its balance sheet: The current market price for a share of Concin's stock is $24.25. If the firm declares a 10% stock dividend and a $0.06 per share cash dividend, what will be the impact on Common stock on the above equity account?

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 percent while the cost of new equity is 16 percent. If Wagner has $90 million of investment projects having expected returns greater than 16 percent, determine Wagner's dividend and investment policies.

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?

All of the following are arguments for the relevance of dividends except:

Last year, Toluca Engineering paid a $0.25 dividend per share each quarter. If Toluca announces both a 5 percent stock dividend and an increase in the quarterly dividend to $0.27, what is the effective rate of the dividend increase?

Zycad has operating earnings (EBIT) of $8.6 million and annual interest expenses are $1.5 million. Zycad wishes to maintain its annual dividend of $1.00 per share on the 1,900,000 shares outstanding. The firm has a bond issue outstanding that requires the retirement of $3 million (face value) of the issue each year through purchases of the bonds in the market. What is the maximum dividend per share that may be paid if the current market price of the bonds is $85? Assume the marginal tax rate is 40% and that earnings are the only source of funds that can be used to pay the dividend and retire the bonds.

Firms with the ____ earnings growth tend to have the ____ dividend payout ratio.

Many firms try to maintain a stable dividend policy

On the ex-dividend date, the

The value of a firm is influenced by three types of financial decisions including all of the following EXCEPT:

Interim Systems has 1.5 million shares outstanding. This year Interim will have operating income (EBIT) of $18.2 million, interest expenses of $2.4 million, depreciation expenses of $3.1 million. What will the dividend per share be if Interim's dividend payout ratio is 40%? Assume a marginal tax rate of 40%.

If Sulzer has 10 million shares outstanding, operating income (EBIT) of $42.4 million, and interest expenses of $6.8 million, what is Sulzer's dividend payout ratio, given that the dividend per share is $0.80? Assume a marginal tax rate of 40%.

Badger Tool and Die Company has 100,000 shares outstanding and plans to pay $1.00 per share in dividends each quarter next year. Badger has a capital budget of $700,000 for next year and plans to maintain its present debt ratio of 0.30. If earnings are expected to be $7.20 per share, how much external equity must Badger raise?

Kaneb Services, Inc. has just declared a 3 for 2 stock split. The company's pre-split common stockholders' equity was as follows: If the pre-split price of common stock was $42, what will be the amount of retained earnings after the split?

The theoretical post-stock dividend price is equal to the pre-stock dividend price ____.

Several regulations limit dividend payments. All of the following limit dividend payments except:

Restrictive covenants are contained in all of the following except

All of the following are alternative dividend policies EXCEPT:

The dividend ____ states that investors will tend to be attracted to firms that have dividend policies consistent with the investor's objectives

In recent years ___________________ has been a major source of equity financing for private industry.