Question 1

Which statement is true?

Accepted Answer

A) Dividends are evenly distributed by a wide range of companies in various industries and of varying sizes. 
B) Unanticipated changes in dividends can affect stock prices. 
C) Managers never cut dividends. 
D) Cash dividends and stock repurchases have increased in nominal terms but decreased in real terms. 
E) Managers tend to increase dividends rapidly when transitory earnings rise. 
A) Dividends are evenly distributed by a wide range of companies in various industries and of varying sizes. 
B) Unanticipated changes in dividends can affect stock prices. 
C) Managers never cut dividends. 
D) Cash dividends and stock repurchases have increased in nominal terms but decreased in real terms. 
E) Managers tend to increase dividends rapidly when transitory earnings rise.

Question 2

A firm has a market value equal to its book value,excess cash of $500,other assets of $6,200,and equity of $8,200.The firm has 400 shares of stock outstanding and net income of $680.What will the new earnings per share be if the firm uses its excess cash to complete a stock repurchase?

Accepted Answer

A) $1.44 
B) $.94 
C) $.86 
D) $1.81 
E) $1.53 
A) $1.44 
B) $.94 
C) $.86 
D) $1.81 
E) $1.53

Question 3

All else equal,the market value of a stock will tend to decrease by roughly the amount of the

Accepted Answer

A) pretax dividend amount on the ex-dividend date. 
B) aftertax dividend amount on the ex-dividend date. 
C) pretax dividend amount on the declaration date. 
D) pretax dividend amount on the date of payment. 
E) aftertax dividend amount on the date of payment. 
A) pretax dividend amount on the ex-dividend date. 
B) aftertax dividend amount on the ex-dividend date. 
C) pretax dividend amount on the declaration date. 
D) pretax dividend amount on the date of payment. 
E) aftertax dividend amount on the date of payment.

Question 4

Lisa purchased 200 shares of ABC stock on May 15th.On May 21st,she purchased another 200 shares,and then on May 22nd,she purchased 200 additional shares.The company declared a dividend of $1.47 a share on May 5th to holders of record on Friday,May 23rd.The dividend is payable on May 31st.How much dividend income will she receive on May 31st from ABC?

Accepted Answer

A) $0 
B) $294 
C) $234 
D) $468 
E) $588 
A) $0 
B) $294 
C) $234 
D) $468 
E) $588

Question 5

The fact that flotation costs can be significant is justification for

Accepted Answer

A) maintaining a high dividend policy. 
B) maintaining a low dividend policy and rarely issuing extra dividends. 
C) maintaining a constant dividend policy even when profits decline significantly. 
D) a firm to issue larger dividends than its closest competitors. 
E) a firm to maintain a constant dividend policy even if it frequently has to issue new shares of stock to do so. 
A) maintaining a high dividend policy. 
B) maintaining a low dividend policy and rarely issuing extra dividends. 
C) maintaining a constant dividend policy even when profits decline significantly. 
D) a firm to issue larger dividends than its closest competitors. 
E) a firm to maintain a constant dividend policy even if it frequently has to issue new shares of stock to do so.

Question 6

Which statement is correct?

Accepted Answer

A) Total owner's equity decreases with a small stock dividend but not with a large stock dividend. 
B) A large stock dividend increases both the common stock and the capital in excess of par value account values. 
C) Stock dividends of 40 percent or less are called small stock dividends. 
D) Stock splits and stock dividends have been definitively proven to have no effect on a firm's market value. 
E) A small stock dividend increases both the par value per share and the value of the capital in excess of par value account. 
A) Total owner's equity decreases with a small stock dividend but not with a large stock dividend. 
B) A large stock dividend increases both the common stock and the capital in excess of par value account values. 
C) Stock dividends of 40 percent or less are called small stock dividends. 
D) Stock splits and stock dividends have been definitively proven to have no effect on a firm's market value. 
E) A small stock dividend increases both the par value per share and the value of the capital in excess of par value account.

Question 7

Which one of these statements is true?

Accepted Answer

A) Transaction and issue costs have no effect on dividend policy. 
B) If the shareholders of an acquired company receive shares in the acquirer rather than cash,they avoid paying taxes. 
C) Stock dividends provide shares that can be used for the exercise of shares under an employee stock option plan. 
D) Individual investors desiring current income need to invest solely in high-dividend stocks. 
E) In the United States,stock sales have exceeded stock repurchases every year since 2008. 
A) Transaction and issue costs have no effect on dividend policy. 
B) If the shareholders of an acquired company receive shares in the acquirer rather than cash,they avoid paying taxes. 
C) Stock dividends provide shares that can be used for the exercise of shares under an employee stock option plan. 
D) Individual investors desiring current income need to invest solely in high-dividend stocks. 
E) In the United States,stock sales have exceeded stock repurchases every year since 2008.

Question 8

Quick Mart has been paying a quarterly dividend of $1.20 a share.Which of the following are valid reasons for the firm to reduce or eliminate these dividends?
I.The firm is on the verge of violating a bond restriction.
II.The firm wants to save cash for an acquisition with a 40 percent premium.
III.The firm can raise new capital easily at a very low cost.
IV.Congress just changed the tax laws eliminating all taxes on capital gains.

Accepted Answer

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

Question 9

Which one of these statements is true?

Accepted Answer

A) Managers tend to benefit more from decreasing a firm's size rather than increasing its size. 
B) Dividend payout policies are always set according to the best interest of the shareholders. 
C) Acquisitions are generally believed to be an excellent alternative to dividends. 
D) The IRS code discourages the accumulation of surplus cash thereby encouraging dividends. 
E) Current tax law favors dividends over repurchases from the stockholders' point of view. 
A) Managers tend to benefit more from decreasing a firm's size rather than increasing its size. 
B) Dividend payout policies are always set according to the best interest of the shareholders. 
C) Acquisitions are generally believed to be an excellent alternative to dividends. 
D) The IRS code discourages the accumulation of surplus cash thereby encouraging dividends. 
E) Current tax law favors dividends over repurchases from the stockholders' point of view.

Question 10

Which of these are common characteristics of a tender offer?
I.The offer can be cancelled if less than the desired number of shares are offered.
II.Sellers are unaware that the buyer is the issuer of the security.
III.The offers made by the sellers determine the price.
IV.The offer price is generally greater than the market price.

Accepted Answer

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

Question 11

Of the following factors,which one is considered to be the primary factor affecting a firm's dividend decision?

Accepted Answer

A) The personal taxes company stockholders incur on dividend distributions 
B) Maintaining consistency with the historical dividend policy 
C) Attracting retail investors 
D) Attracting institutional investors 
E) Sustainable changes in earnings 
A) The personal taxes company stockholders incur on dividend distributions 
B) Maintaining consistency with the historical dividend policy 
C) Attracting retail investors 
D) Attracting institutional investors 
E) Sustainable changes in earnings

Question 12

Which of the following tend to keep dividends low?
I.Potential for companies to use excess cash on negative NPV projects
II.Restrictive terms contained in bond indenture agreements
III.Manager's desire to maintain constant dividends over time
IV.Flotation costs

Accepted Answer

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

Question 13

Leslie owns 600 shares of Good Manners stock.The company will pay per share dividends of $1.42 1 year from now and $1.48 2 years from now.Leslie does not want any dividend income 1 year from now but does want as much dividend income as possible the following year.She plans on creating her own homemade dividends and can borrow and lend at 7 percent.Ignoring taxes,what will her homemade dividend per share be 2 years from now?

Accepted Answer

A) $2.97 
B) $2.90 
C) $2.46 
D) $3.00 
E) $1.48 
A) $2.97 
B) $2.90 
C) $2.46 
D) $3.00 
E) $1.48

Question 14

The highest and lowest prices at which a stock has traded over a period of time is called its

Accepted Answer

A) bid-ask spread. 
B) average price. 
C) closing price. 
D) opening price. 
E) trading range. 
A) bid-ask spread. 
B) average price. 
C) closing price. 
D) opening price. 
E) trading range.

Question 15

The Retail Outlet has 17,500 shares of stock outstanding with a par value of $1 per share.The current book value of the firm is $387,800 and the balance in the capital in excess of par value account is $146,300.The company just announced a four-for-three stock split.What will be the common stock account balance after the split?

Accepted Answer

A) $11,000 
B) $13,125 
C) $23,333 
D) $14,500 
E) $17,500 
A) $11,000 
B) $13,125 
C) $23,333 
D) $14,500 
E) $17,500

Question 16

A cash payment made by a firm to its owners when some of the firm's assets are sold off is called a(n)

Accepted Answer

A) extra cash dividend. 
B) special dividend. 
C) regular cash dividend. 
D) liquidating dividend. 
E) share repurchase. 
A) extra cash dividend. 
B) special dividend. 
C) regular cash dividend. 
D) liquidating dividend. 
E) share repurchase.

Question 17

A stock currently sells for $65.70 a share.What type of stock split would be best if the stock's proper trading range centers on $22 a share?

Accepted Answer

A) two-for-five reverse stock split 
B) one-for-three reverse stock split 
C) two-for-three reverse stock split 
D) five-for-two stock split 
E) three-for-one stock split 
A) two-for-five reverse stock split 
B) one-for-three reverse stock split 
C) two-for-three reverse stock split 
D) five-for-two stock split 
E) three-for-one stock split

Question 18

The Retail Outlet has 6,000 shares of stock outstanding with a par value of $1 per share.The current market value of the firm is $120,000.The company just announced a one-for-three reverse stock split.What will the par value per share be after the split?

Accepted Answer

A) $.33 
B) $.25 
C) $1.00 
D) $3.00 
E) $4.00 
A) $.33 
B) $.25 
C) $1.00 
D) $3.00 
E) $4.00

Question 19

Robinson's has 12,000 shares of stock outstanding with a par value of $1 per share and a market price of $24.20 a share.The firm just announced a four-for-three stock split.What will the market price per share be after the split?

Accepted Answer

A) $18.15 
B) $17.65 
C) $18.25 
D) $30.46 
E) $32.27 
A) $18.15 
B) $17.65 
C) $18.25 
D) $30.46 
E) $32.27

Question 20

The date on which the board of directors passes a resolution authorizing payment of a dividend to the shareholders is the ________ date.

Accepted Answer

A) ex-rights 
B) ex-dividend 
C) record 
D) payment 
E) declaration 
A) ex-rights 
B) ex-dividend 
C) record 
D) payment 
E) declaration

Which statement is true?

A firm has a market value equal to its book value,excess cash of $500,other assets of $6,200,and equity of $8,200.The firm has 400 shares of stock outstanding and net income of $680.What will the new earnings per share be if the firm uses its excess cash to complete a stock repurchase?

All else equal,the market value of a stock will tend to decrease by roughly the amount of the

The fact that flotation costs can be significant is justification for

Which statement is correct?

Which one of these statements is true?

Which one of these statements is true?

Of the following factors,which one is considered to be the primary factor affecting a firm's dividend decision?

Which of the following tend to keep dividends low? I.Potential for companies to use excess cash on negative NPV projects II.Restrictive terms contained in bond indenture agreements III.Manager's desire to maintain constant dividends over time IV.Flotation costs

The highest and lowest prices at which a stock has traded over a period of time is called its

A cash payment made by a firm to its owners when some of the firm's assets are sold off is called a(n)

A stock currently sells for $65.70 a share.What type of stock split would be best if the stock's proper trading range centers on $22 a share?

The Retail Outlet has 6,000 shares of stock outstanding with a par value of $1 per share.The current market value of the firm is $120,000.The company just announced a one-for-three reverse stock split.What will the par value per share be after the split?

Robinson's has 12,000 shares of stock outstanding with a par value of $1 per share and a market price of $24.20 a share.The firm just announced a four-for-three stock split.What will the market price per share be after the split?

The date on which the board of directors passes a resolution authorizing payment of a dividend to the shareholders is the ________ date.

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

Which statement is true?

A firm has a market value equal to its book value,excess cash of $500,other assets of $6,200,and equity of $8,200.The firm has 400 shares of stock outstanding and net income of $680.What will the new earnings per share be if the firm uses its excess cash to complete a stock repurchase?

All else equal,the market value of a stock will tend to decrease by roughly the amount of the

The fact that flotation costs can be significant is justification for

Which statement is correct?

Which one of these statements is true?

Which one of these statements is true?

Of the following factors,which one is considered to be the primary factor affecting a firm's dividend decision?

Which of the following tend to keep dividends low? I.Potential for companies to use excess cash on negative NPV projects II.Restrictive terms contained in bond indenture agreements III.Manager's desire to maintain constant dividends over time IV.Flotation costs

The highest and lowest prices at which a stock has traded over a period of time is called its

A cash payment made by a firm to its owners when some of the firm's assets are sold off is called a(n)

A stock currently sells for $65.70 a share.What type of stock split would be best if the stock's proper trading range centers on $22 a share?

The Retail Outlet has 6,000 shares of stock outstanding with a par value of $1 per share.The current market value of the firm is $120,000.The company just announced a one-for-three reverse stock split.What will the par value per share be after the split?

Robinson's has 12,000 shares of stock outstanding with a par value of $1 per share and a market price of $24.20 a share.The firm just announced a four-for-three stock split.What will the market price per share be after the split?

The date on which the board of directors passes a resolution authorizing payment of a dividend to the shareholders is the ________ date.

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