Exam 18: Long-Term Financial Planning

Which of the following signals is most likely to elicit a decrease in share price?

StoreWide Inc.'s shares are selling for $40 per share.Determine the new price per share, if the company a 5 for 4 stock split.

If a firm declares a stock dividend of 10%, it would send each shareholder one additional share for each ten that are currently owned.

The date on which actual dividend cheques are mailed to shareholders is the:

Xavier Corporation has declared a $4 per share in dividends.The federal tax rate is 26% and the provincial tax rate is 13.39%.Federal and Provincial tax credits are 13.33% and 5.1% respectively on the grossed up amount of the dividend.The gross up amount is 25%.Determine the after tax dividend income.

Discuss the concept of dividend signaling.

Under current tax law, the longer an investor waits to sell an inflated stock, the lower is the present value of the tax liability.

Dividends are likely to shift up and down as earnings fluctuate so that managers can maintain a stable payout ratio.

124.Thompson Inc.has just paid $2.50 in dividends.Determine the after tax dividend received and the average tax rate given the following tax information: 25% gross up; federal tax rate is 29%; 14% federal tax credit; 16% provincial tax rate; 6% provincial tax credit.

A two-for-one stock split is like a 200% stock dividend.

What capital gain must a non-dividend-paying stock attain in order for a corporate investor in the 35% tax bracket to be indifferent to a stock paying an 8% dividend but having no capital gain?

When a firm declares a stock repurchase:

Suppose two equally risky shares, "Div" and "Cap", offer the same expected return before tax.Div shares pay a generous dividend but offer low expected capital gains.Cap shares pay low dividends but offer high expected capital gains.Which of the two shares would a pension fund prefer? An individual? A corporation? Explain your answers.

Briefly discuss each of the chronological "steps" in the process of paying a dividend.

Under the idealized conditions of MM, which statement is correct when a firm issues new stock in order to pay a cash dividend on existing shares?

Anyone holding a stock before its ex-dividend date is entitled to the dividend.

High dividends may be used as __________ of a firm's __________.

A 50% stock dividend provides the same return to an investor as a 50% cash dividend.

In regards to dividend policy, unless a firm's investment policy and borrowing remain constant:

What effect does a stock dividend have on the book and market values of the firm?