Question 1

Observation and research shows that

Accepted Answer

A) dividends have almost been eliminated due to increased stock repurchases. 
B) during the year 1979,about two-thirds of dividends were paid to individuals with a marginal tax rate of 15 percent or less. 
C) the largest corporations have been holding their dividends constant over the last 20 years. 
D) for the period 1980 to 2012,aggregate dividends averaged about 30 percent of aggregate earnings. 
E) the percentage of corporations paying dividends has increased since the Year 2002. 
A) dividends have almost been eliminated due to increased stock repurchases. 
B) during the year 1979,about two-thirds of dividends were paid to individuals with a marginal tax rate of 15 percent or less. 
C) the largest corporations have been holding their dividends constant over the last 20 years. 
D) for the period 1980 to 2012,aggregate dividends averaged about 30 percent of aggregate earnings. 
E) the percentage of corporations paying dividends has increased since the Year 2002. E

Question 2

Pete's Pets has 18,500 shares of stock outstanding with a par value of $1 per share and a market price of $21 a share.The firm just announced a three-for-two stock split.How many shares of stock will be outstanding after the split?

Accepted Answer

A) 12,000 shares 
B) 14,000 shares 
C) 27,750 shares 
D) 22,250 shares 
E) 29,250 shares 
A) 12,000 shares 
B) 14,000 shares 
C) 27,750 shares 
D) 22,250 shares 
E) 29,250 shares C

Question 3

Payments made out of a firm's earnings to its owners in the form of cash or stock are called

Accepted Answer

A) stock splits. 
B) distributions. 
C) dividends. 
D) payments-in-kind. 
E) share repurchases. 
A) stock splits. 
B) distributions. 
C) dividends. 
D) payments-in-kind. 
E) share repurchases. C

Question 4

Which one of the following is an argument in favor of a low dividend policy?

Accepted Answer

A) Few,if any,positive net present value projects are available to the firm. 
B) Only the gain on a sale of stock is taxed. 
C) Agency costs 
D) Investor desire for current income 
E) Lack of investor self-control 
A) Few,if any,positive net present value projects are available to the firm. 
B) Only the gain on a sale of stock is taxed. 
C) Agency costs 
D) Investor desire for current income 
E) Lack of investor self-control

Question 5

Assume the stockholders of GPO stock are in the 15 percent tax bracket.The closing price of the stock today was $32.09 a share.The firm pays a quarterly dividend of $1.20 per share.What is the expected opening price of the stock tomorrow if tomorrow is an ex-dividend date?

Accepted Answer

A) $32.09 
B) $30.71 
C) $32.14 
D) $27.61 
E) $31.07 
A) $32.09 
B) $30.71 
C) $32.14 
D) $27.61 
E) $31.07

Question 6

On the date of record,the stock price drop related to the dividend is

Accepted Answer

A) a full adjustment for the dividend payment. 
B) a partial adjustment for the dividend payment because of the tax effect. 
C) zero because the adjustment occurs on the ex-dividend date. 
D) zero because the adjustment occurs on the payment date. 
E) generally greater than the dividend amount. 
A) a full adjustment for the dividend payment. 
B) a partial adjustment for the dividend payment because of the tax effect. 
C) zero because the adjustment occurs on the ex-dividend date. 
D) zero because the adjustment occurs on the payment date. 
E) generally greater than the dividend amount.

Question 7

Litner's model supports the belief that

Accepted Answer

A) dividends are decreasing in importance. 
B) corporations smooth dividends. 
C) dividends tend to be more volatile than earnings. 
D) dividend increases tend to lead earnings increases. 
E) dividends and earnings rise and fall in sync with each other. 
A) dividends are decreasing in importance. 
B) corporations smooth dividends. 
C) dividends tend to be more volatile than earnings. 
D) dividend increases tend to lead earnings increases. 
E) dividends and earnings rise and fall in sync with each other.

Question 8

The argument that selling stock involves too much leeway is the

Accepted Answer

A) primary argument for implementing homemade dividends. 
B) primary argument against homemade dividends. 
C) principal reason firms do reverse stock splits. 
D) behavioral finance argument in favor of high dividends. 
E) behavioral finance argument in favor of low dividends. 
A) primary argument for implementing homemade dividends. 
B) primary argument against homemade dividends. 
C) principal reason firms do reverse stock splits. 
D) behavioral finance argument in favor of high dividends. 
E) behavioral finance argument in favor of low dividends.

Question 9

The observed empirical fact that stocks attract particular investors based on the firm's dividend policy and the resulting tax impact on investors is called the

Accepted Answer

A) clientele effect. 
B) efficient markets hypothesis. 
C) information content effect. 
D) MM Proposition I. 
E) MM Proposition II. 
A) clientele effect. 
B) efficient markets hypothesis. 
C) information content effect. 
D) MM Proposition I. 
E) MM Proposition II.

Question 10

Winslow Co.has 74,200 shares of stock outstanding at a market price of $52 a share.The company just announced a five-for-two stock split.How many shares of stock will be outstanding after the split?

Accepted Answer

A) 29,680 shares 
B) 32,320 shares 
C) 74,200 shares 
D) 180,500 shares 
E) 185,500 shares 
A) 29,680 shares 
B) 32,320 shares 
C) 74,200 shares 
D) 180,500 shares 
E) 185,500 shares

Question 11

A fixed repurchase strategy

Accepted Answer

A) increases a company's market value each time shares are repurchased. 
B) can force firms into making negative NPV investments. 
C) requires a trustee to oversee and monitor all repurchases. 
D) allows managers to repurchase shares only when they believe those shares are undervalued. 
E) is easy to verify in a timely manner. 
A) increases a company's market value each time shares are repurchased. 
B) can force firms into making negative NPV investments. 
C) requires a trustee to oversee and monitor all repurchases. 
D) allows managers to repurchase shares only when they believe those shares are undervalued. 
E) is easy to verify in a timely manner.

Question 12

A reverse stock split associated with a cash buyout is sometimes used as a means of

Accepted Answer

A) decreasing the liquidity of a stock. 
B) decreasing the market value per share of stock. 
C) increasing the number of stockholders. 
D) raising cash from current stockholders. 
E) eliminating small stockholders. 
A) decreasing the liquidity of a stock. 
B) decreasing the market value per share of stock. 
C) increasing the number of stockholders. 
D) raising cash from current stockholders. 
E) eliminating small stockholders.

Question 13

Assume the stockholders of EX stock are in the 25 percent tax bracket.The closing price of the stock today was $54.15 a share.The firm pays a quarterly dividend of $1.22 per share.What is the expected opening price of the stock tomorrow if tomorrow is an ex-dividend date?

Accepted Answer

A) $52.63 
B) $55.53 
C) $54.18 
D) $53.61 
E) $53.24 
A) $52.63 
B) $55.53 
C) $54.18 
D) $53.61 
E) $53.24

Question 14

Companies are more apt to choose repurchases over dividends if doing so will enable them to
I.take advantage of a market undervaluation of their shares.
II.maintain or increase the value of executive stock options.
III.offset the dilution created by the exercise of executive stock options.
IV.distribute revenue increases that are considered to be temporary or short-term in nature.

Accepted Answer

A) I and II only 
B) II and IV only 
C) I,II,and IV only 
D) II,III,and IV only 
E) I,II,III,and IV 
A) I and II only 
B) II and IV only 
C) I,II,and IV only 
D) II,III,and IV only 
E) I,II,III,and IV

Question 15

Men's Place has 21,000 shares of stock outstanding with a par value of $1 per share and a market value of $27.18 per share.The balance sheet shows $21,000 in the common stock account,$187,600 in the capital in excess of par value account,and $218,200 in the retained earnings account.The firm just announced a large stock dividend of 35 percent.What is the market value per share after the dividend?

Accepted Answer

A) $27.18 
B) $20.13 
C) $20.25 
D) $19.50 
E) $19.67 
A) $27.18 
B) $20.13 
C) $20.25 
D) $19.50 
E) $19.67

Question 16

If you want to receive the recently declared dividend on ABG stock,you must purchase your shares ________ or more business day(s)prior to the date of record.

Accepted Answer

A) four 
B) one 
C) two 
D) three 
E) five 
A) four 
B) one 
C) two 
D) three 
E) five

Question 17

How can management best signal the market that a firm is doing well?

Accepted Answer

A) Distribute a liquidating dividend 
B) Issue additional shares of stock 
C) Increase the regular dividend amount 
D) Issue stock to pay the regular dividend 
E) Replace the regular dividend with a stock dividend 
A) Distribute a liquidating dividend 
B) Issue additional shares of stock 
C) Increase the regular dividend amount 
D) Issue stock to pay the regular dividend 
E) Replace the regular dividend with a stock dividend

Question 18

Cat's has 41,800 shares of stock outstanding with a par value of $1 per share and a market value of $13.57 per share.The balance sheet shows $41,800 in the common stock account,$247,900 in the capital in excess of par value account,and $308,500 in retained earnings.The firm just announced a large stock dividend of 50 percent.What is the value of the retained earnings account after the dividend?

Accepted Answer

A) $287,600 
B) $268,500 
C) $24,887 
D) $45,787 
E) $308,500 
A) $287,600 
B) $268,500 
C) $24,887 
D) $45,787 
E) $308,500

Question 19

The indifference policy advocates that

Accepted Answer

A) dividends are irrelevant. 
B) firms are indifferent to dividend policy but stockholders are not. 
C) stockholders are indifferent to dividend policy only as long as dividends are held constant. 
D) dividend policy is irrelevant as long as the firm's investment policy is modified for dividend changes. 
E) dividend policy is irrelevant. 
A) dividends are irrelevant. 
B) firms are indifferent to dividend policy but stockholders are not. 
C) stockholders are indifferent to dividend policy only as long as dividends are held constant. 
D) dividend policy is irrelevant as long as the firm's investment policy is modified for dividend changes. 
E) dividend policy is irrelevant.

Question 20

Auto Supply has 54,200 shares of stock outstanding with a par value of $1 per share and a market value of $6.20 a share.The company just announced a two-for-nine reverse stock split.What will be the par value per share after the split?

Accepted Answer

A) $.22 
B) $.44 
C) $1.00 
D) $2.50 
E) $4.50 
A) $.22 
B) $.44 
C) $1.00 
D) $2.50 
E) $4.50

Observation and research shows that

Pete's Pets has 18,500 shares of stock outstanding with a par value of $1 per share and a market price of $21 a share.The firm just announced a three-for-two stock split.How many shares of stock will be outstanding after the split?

Payments made out of a firm's earnings to its owners in the form of cash or stock are called

Which one of the following is an argument in favor of a low dividend policy?

Assume the stockholders of GPO stock are in the 15 percent tax bracket.The closing price of the stock today was $32.09 a share.The firm pays a quarterly dividend of $1.20 per share.What is the expected opening price of the stock tomorrow if tomorrow is an ex-dividend date?

On the date of record,the stock price drop related to the dividend is

Litner's model supports the belief that

The argument that selling stock involves too much leeway is the

The observed empirical fact that stocks attract particular investors based on the firm's dividend policy and the resulting tax impact on investors is called the

Winslow Co.has 74,200 shares of stock outstanding at a market price of $52 a share.The company just announced a five-for-two stock split.How many shares of stock will be outstanding after the split?

A fixed repurchase strategy

A reverse stock split associated with a cash buyout is sometimes used as a means of

Assume the stockholders of EX stock are in the 25 percent tax bracket.The closing price of the stock today was $54.15 a share.The firm pays a quarterly dividend of $1.22 per share.What is the expected opening price of the stock tomorrow if tomorrow is an ex-dividend date?

If you want to receive the recently declared dividend on ABG stock,you must purchase your shares ________ or more business day(s)prior to the date of record.

How can management best signal the market that a firm is doing well?

The indifference policy advocates that

Auto Supply has 54,200 shares of stock outstanding with a par value of $1 per share and a market value of $6.20 a share.The company just announced a two-for-nine reverse stock split.What will be the par value per share after the split?

Introduction to Corporate Finance

Financial Statements and Cash Flow

Financial Statements Analysis and Financial Models

Discounted Cash Flow Valuation

Interest Rates and Bond Valuation

Stock Valuation

Net Present Value and Other Investment Rules

Making Capital Investment Decisions

Risk Analysis, Real Options, and Capital Budgeting

Risk and Return: Lessons From Market History

Return and Risk: The Capital Asset Pricing Model Capm

Risk, Cost of Capital, and Valuation

Efficient Capital Markets and Behavioral Challenges

Capital Structure: Basic Concepts

Capital Structure: Limits to the Use of Debt

Options and Corporate Finance

Short-Term Finance and Planning

Raising Capital

International Corporate Finance

Mergers and Acquisitions Web Only

Filters

Exam 16: Dividends and Other Payouts

Observation and research shows that

Pete's Pets has 18,500 shares of stock outstanding with a par value of $1 per share and a market price of $21 a share.The firm just announced a three-for-two stock split.How many shares of stock will be outstanding after the split?

Payments made out of a firm's earnings to its owners in the form of cash or stock are called

Which one of the following is an argument in favor of a low dividend policy?

Assume the stockholders of GPO stock are in the 15 percent tax bracket.The closing price of the stock today was $32.09 a share.The firm pays a quarterly dividend of $1.20 per share.What is the expected opening price of the stock tomorrow if tomorrow is an ex-dividend date?

On the date of record,the stock price drop related to the dividend is

Litner's model supports the belief that

The argument that selling stock involves too much leeway is the

The observed empirical fact that stocks attract particular investors based on the firm's dividend policy and the resulting tax impact on investors is called the

Winslow Co.has 74,200 shares of stock outstanding at a market price of $52 a share.The company just announced a five-for-two stock split.How many shares of stock will be outstanding after the split?

A fixed repurchase strategy

A reverse stock split associated with a cash buyout is sometimes used as a means of

Assume the stockholders of EX stock are in the 25 percent tax bracket.The closing price of the stock today was $54.15 a share.The firm pays a quarterly dividend of $1.22 per share.What is the expected opening price of the stock tomorrow if tomorrow is an ex-dividend date?

If you want to receive the recently declared dividend on ABG stock,you must purchase your shares ________ or more business day(s)prior to the date of record.

How can management best signal the market that a firm is doing well?

The indifference policy advocates that

Auto Supply has 54,200 shares of stock outstanding with a par value of $1 per share and a market value of $6.20 a share.The company just announced a two-for-nine reverse stock split.What will be the par value per share after the split?

Introduction to Corporate Finance

Financial Statements and Cash Flow

Financial Statements Analysis and Financial Models

Discounted Cash Flow Valuation

Interest Rates and Bond Valuation

Stock Valuation

Net Present Value and Other Investment Rules

Making Capital Investment Decisions

Risk Analysis, Real Options, and Capital Budgeting

Risk and Return: Lessons From Market History

Return and Risk: The Capital Asset Pricing Model Capm

Risk, Cost of Capital, and Valuation

Efficient Capital Markets and Behavioral Challenges

Capital Structure: Basic Concepts

Capital Structure: Limits to the Use of Debt

Options and Corporate Finance

Short-Term Finance and Planning

Raising Capital

International Corporate Finance

Mergers and Acquisitions Web Only

Filters