Question 1

Suppose a firm has a retention ratio of 35 percent and net income of $2 million. How much does it pay out in dividends?

Accepted Answer

A)  $700,000 
B)  $1.3 million 
C)  $2 million 
D)  $3.07 million 
A)  $700,000 
B)  $1.3 million 
C)  $2 million 
D)  $3.07 million B

Question 2

Explain Gordon and Lintner's Bird-in-the-hand theory.

Accepted Answer

This theory argues that dividends that the firm has committed to pay are less risky (and hence more attractive) to risk-averse investors than are potential future capital gains.

Question 3

Suppose a firm has a dividend payout ratio of 47 percent and net income of $7 million. What would be the annual addition to retained earnings?

Accepted Answer

A)  $3,890,000 
B)  $3,290,000 
C)  $3,710,000 
D)  $3,510,000 
A)  $3,890,000 
B)  $3,290,000 
C)  $3,710,000 
D)  $3,510,000 C

Question 4

Regarding dividend payment procedures, this is the first day that the shares will be traded without the dividend attached.

Accepted Answer

A)  declaration date 
B)  ex-dividend date 
C)  record date 
D)  payment date 
A)  declaration date 
B)  ex-dividend date 
C)  record date 
D)  payment date

Question 5

What would prompt a firm like GE to start paying out a much higher percentage of its earnings as dividends?

Accepted Answer

In general, a firm would incre

Question 6

Brady inherited 500 shares of LNM, Inc. The stock is selling in the market for $92 per share and the company is contemplating a 5-for-3 stock split. Given this information, which of the following statements is correct?

Accepted Answer

A)  Brady will have 300 shares and stock's price will be near $153.33. 
B)  Brady will have 300 shares and stock's price will be near $55.20. 
C)  Brady will have 833.33 shares and stock's price will be near $55.20. 
D)  Brady will have 833.33 shares and stock's price will be near $153.33. 
A)  Brady will have 300 shares and stock's price will be near $153.33. 
B)  Brady will have 300 shares and stock's price will be near $55.20. 
C)  Brady will have 833.33 shares and stock's price will be near $55.20. 
D)  Brady will have 833.33 shares and stock's price will be near $153.33.

Question 7

Which of the following statements is correct?

Accepted Answer

A)  The Dutch auction relies on the firm's shareholders to value the stock. 
B)  The Dutch auction tends to attract arbitrageurs who often drive up the price. 
C)  The Dutch auction offers the possibility that the firm will pay more than the maximum price of the specified range. 
D)  All of these are correct. 
A)  The Dutch auction relies on the firm's shareholders to value the stock. 
B)  The Dutch auction tends to attract arbitrageurs who often drive up the price. 
C)  The Dutch auction offers the possibility that the firm will pay more than the maximum price of the specified range. 
D)  All of these are correct.

Question 8

Candy Town, Inc. normally pays a quarterly dividend. The last such dividend paid was $2.00, all future quarterly dividends are expected to grow at 10 percent, and the firm faces a required rate of return on equity of 15 percent. If the firm just announced that the next dividend will be an extraordinary dividend of $5.00 per share that is not expected to affect any other future dividends, what should the stock price be?

Accepted Answer

A)  $40.00 
B)  $42.44 
C)  $44.00 
D)  $46.44 
A)  $40.00 
B)  $42.44 
C)  $44.00 
D)  $46.44

Question 9

When might raising a firm's dividend payout ratio be viewed as a negative signal?

Accepted Answer

It may be interprete

Question 10

The board of directors announces its intention to pay a dividend on the ____________________.

Accepted Answer

A)  Ex-dividend date 
B)  Record date 
C)  Declaration date 
D)  Dividend announcement date 
A)  Ex-dividend date 
B)  Record date 
C)  Declaration date 
D)  Dividend announcement date

Question 11

Brady inherited 1000 shares of LNM, Inc. The stock is selling in the market for $177 per share and the company is contemplating a 2-for-6 stock split. Given this information, which of the following statements is correct?

Accepted Answer

A)  Brady will have 3000 shares and stock's price will be near $531. 
B)  Brady will have 3000 shares and stock's price will be near $59. 
C)  Brady will have 333.33 shares and stock's price will be near $531. 
D)  Brady will have 333.33 shares and stock's price will be near $59. 
A)  Brady will have 3000 shares and stock's price will be near $531. 
B)  Brady will have 3000 shares and stock's price will be near $59. 
C)  Brady will have 333.33 shares and stock's price will be near $531. 
D)  Brady will have 333.33 shares and stock's price will be near $59.

Question 12

Suppose a firm has a retention ratio of 25 percent, net income of $30 million, and 5 million shares outstanding. What would be the dividend per share paid out on the firm's stock?

Accepted Answer

A)  $1.50 
B)  $4.50 
C)  $6.00 
D)  $16.67 
A)  $1.50 
B)  $4.50 
C)  $6.00 
D)  $16.67

Question 13

Suppose a firm has a retention ratio of 35 percent, net income of $35 million, and 10 million shares outstanding. What would be the dividend per share paid out on the firm's stock?

Accepted Answer

A)  $1.225 
B)  $2.275 
C)  $3.50 
D)  $7.00 
A)  $1.225 
B)  $2.275 
C)  $3.50 
D)  $7.00

Question 14

GBH Inc. is planning on announcing a 2-for-5 stock split. The stock is currently trading at $12 per share. Based on this information, what will be the new stock price?

Accepted Answer

A)  $4.80 
B)  $5.10 
C)  $27.00 
D)  $30.00 
A)  $4.80 
B)  $5.10 
C)  $27.00 
D)  $30.00

Question 15

Which of the following is correct?

Accepted Answer

A)  Stock prices increase as the next dividend approaches and then fall by the present value of that dividend once the stock goes ex-dividend. 
B)  Stock prices decrease as the next dividend approaches and then fall by the present value of that dividend once the stock goes ex-dividend. 
C)  Stock prices increase as the next dividend approaches and then increase by the present value of that dividend once the stock goes ex-dividend. 
D)  None of these 
A)  Stock prices increase as the next dividend approaches and then fall by the present value of that dividend once the stock goes ex-dividend. 
B)  Stock prices decrease as the next dividend approaches and then fall by the present value of that dividend once the stock goes ex-dividend. 
C)  Stock prices increase as the next dividend approaches and then increase by the present value of that dividend once the stock goes ex-dividend. 
D)  None of these

Question 16

Suppose a firm has a dividend payout ratio of 25 percent and net income of $5 million. What would be the annual addition to retained earnings?

Accepted Answer

A)  $3,750,000 
B)  $5,250,000 
C)  $1,750,000 
D)  $750,000 
A)  $3,750,000 
B)  $5,250,000 
C)  $1,750,000 
D)  $750,000

Question 17

MMK Cos. normally pays an annual dividend. The last such dividend paid was $2.00, all future dividends are expect to grow at a rate of 6 percent per year, and the firm faces a required rate of return on equity of 13 percent. If the firm just announced that the next dividend will be an extraordinary dividend of $22 per share that is not expected to affect any other future dividends, what should the stock price be?

Accepted Answer

A)  $39.63 
B)  $47.88 
C)  $49.02 
D)  $32.71 
A)  $39.63 
B)  $47.88 
C)  $49.02 
D)  $32.71

Question 18

Which of the following would cause dividends to decrease if the firm was using the residual dividend model?

Accepted Answer

A)  The firm has more positive NPV projects. 
B)  The firm's dividend payout ratio decreases. 
C)  The firm's average collection period increases. 
D)  All of the these would cause dividends to decrease. 
A)  The firm has more positive NPV projects. 
B)  The firm's dividend payout ratio decreases. 
C)  The firm's average collection period increases. 
D)  All of the these would cause dividends to decrease.

Question 19

On the _____________, the firm will look on its books to find the registered owners so that they can start addressing payments.

Accepted Answer

A)  Owner date 
B)  Record date 
C)  Owner of record date 
D)  Ex-dividend date 
A)  Owner date 
B)  Record date 
C)  Owner of record date 
D)  Ex-dividend date

Question 20

Brady inherited 1750 shares of LNM, Inc. The stock is selling in the market for $82 per share and the company is contemplating a 1-for-3 stock split. Given this information, which of the following statements is correct?

Accepted Answer

A)  Brady will have 583.33 shares and stock's price will be near $246.00. 
B)  Brady will have 583.33 shares and stock's price will be near $27.33. 
C)  Brady will have 5250 shares and stock's price will be near $246.00. 
D)  Brady will have 5250 shares and stock's price will be near $27.33. 
A)  Brady will have 583.33 shares and stock's price will be near $246.00. 
B)  Brady will have 583.33 shares and stock's price will be near $27.33. 
C)  Brady will have 5250 shares and stock's price will be near $246.00. 
D)  Brady will have 5250 shares and stock's price will be near $27.33.

Suppose a firm has a retention ratio of 35 percent and net income of $2 million. How much does it pay out in dividends?

Explain Gordon and Lintner's Bird-in-the-hand theory.

Suppose a firm has a dividend payout ratio of 47 percent and net income of $7 million. What would be the annual addition to retained earnings?

Regarding dividend payment procedures, this is the first day that the shares will be traded without the dividend attached.

What would prompt a firm like GE to start paying out a much higher percentage of its earnings as dividends?

Brady inherited 500 shares of LNM, Inc. The stock is selling in the market for $92 per share and the company is contemplating a 5-for-3 stock split. Given this information, which of the following statements is correct?

Which of the following statements is correct?

When might raising a firm's dividend payout ratio be viewed as a negative signal?

The board of directors announces its intention to pay a dividend on the ____________________.

Brady inherited 1000 shares of LNM, Inc. The stock is selling in the market for $177 per share and the company is contemplating a 2-for-6 stock split. Given this information, which of the following statements is correct?

Suppose a firm has a retention ratio of 25 percent, net income of $30 million, and 5 million shares outstanding. What would be the dividend per share paid out on the firm's stock?

Suppose a firm has a retention ratio of 35 percent, net income of $35 million, and 10 million shares outstanding. What would be the dividend per share paid out on the firm's stock?

GBH Inc. is planning on announcing a 2-for-5 stock split. The stock is currently trading at $12 per share. Based on this information, what will be the new stock price?

Which of the following is correct?

Suppose a firm has a dividend payout ratio of 25 percent and net income of $5 million. What would be the annual addition to retained earnings?

Which of the following would cause dividends to decrease if the firm was using the residual dividend model?

On the _____________, the firm will look on its books to find the registered owners so that they can start addressing payments.

Brady inherited 1750 shares of LNM, Inc. The stock is selling in the market for $82 per share and the company is contemplating a 1-for-3 stock split. Given this information, which of the following statements is correct?

Introduction to Financial Management

Reviewing Financial Statements

Analyzing Financial Statements

Time Value of Money 1: Analyzing Single Cash Flows

Time Value of Money 2: Analyzing Annuity Cash Flows

Understanding Financial Markets and Institutions

Valuing Bonds

Valuing Stocks

Characterizing Risk and Return

Estimating Risk and Return

Calculating the Cost of Capital

Estimating Cash Flows on Capital Budgeting Projects

Weighing Net Present Value and Other Capital Budgeting Criteria

Working Capital Management and Policies

Financial Planning and Forecasting

Assessing Long-Term Debt, Equity, and Capital Structure

Issuing Capital and the Investment Banking Process

International Corporate Finance

Mergers and Acquisitions and Financial Distress

Filters

Exam 17: Sharing Firm Wealth: Dividends, Share Repurchases, and Other Payouts

Suppose a firm has a retention ratio of 35 percent and net income of $2 million. How much does it pay out in dividends?

Explain Gordon and Lintner's Bird-in-the-hand theory.

Suppose a firm has a dividend payout ratio of 47 percent and net income of $7 million. What would be the annual addition to retained earnings?

Regarding dividend payment procedures, this is the first day that the shares will be traded without the dividend attached.

What would prompt a firm like GE to start paying out a much higher percentage of its earnings as dividends?

Brady inherited 500 shares of LNM, Inc. The stock is selling in the market for $92 per share and the company is contemplating a 5-for-3 stock split. Given this information, which of the following statements is correct?

Which of the following statements is correct?

When might raising a firm's dividend payout ratio be viewed as a negative signal?

The board of directors announces its intention to pay a dividend on the ____________________.

Brady inherited 1000 shares of LNM, Inc. The stock is selling in the market for $177 per share and the company is contemplating a 2-for-6 stock split. Given this information, which of the following statements is correct?

Suppose a firm has a retention ratio of 25 percent, net income of $30 million, and 5 million shares outstanding. What would be the dividend per share paid out on the firm's stock?

Suppose a firm has a retention ratio of 35 percent, net income of $35 million, and 10 million shares outstanding. What would be the dividend per share paid out on the firm's stock?

GBH Inc. is planning on announcing a 2-for-5 stock split. The stock is currently trading at $12 per share. Based on this information, what will be the new stock price?

Which of the following is correct?

Suppose a firm has a dividend payout ratio of 25 percent and net income of $5 million. What would be the annual addition to retained earnings?

Which of the following would cause dividends to decrease if the firm was using the residual dividend model?

On the _____________, the firm will look on its books to find the registered owners so that they can start addressing payments.

Brady inherited 1750 shares of LNM, Inc. The stock is selling in the market for $82 per share and the company is contemplating a 1-for-3 stock split. Given this information, which of the following statements is correct?

Introduction to Financial Management

Reviewing Financial Statements

Analyzing Financial Statements

Time Value of Money 1: Analyzing Single Cash Flows

Time Value of Money 2: Analyzing Annuity Cash Flows

Understanding Financial Markets and Institutions

Valuing Bonds

Valuing Stocks

Characterizing Risk and Return

Estimating Risk and Return

Calculating the Cost of Capital

Estimating Cash Flows on Capital Budgeting Projects

Weighing Net Present Value and Other Capital Budgeting Criteria

Working Capital Management and Policies

Financial Planning and Forecasting

Assessing Long-Term Debt, Equity, and Capital Structure

Issuing Capital and the Investment Banking Process

International Corporate Finance

Mergers and Acquisitions and Financial Distress

Filters