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

Suppose a firm has a retention ratio of 80 percent, net income of $10 million, and 2 million shares outstanding. What would be the dividend per share paid out on the firm's stock?

If a firm has retained earnings of $4 million, a common shares account of $7 million, and additional paid-in-capital of $3 million, how much would be transferred in (or out) of these accounts in response to a 20 percent stock dividend, respectively?

Suppose a firm pays total dividends of $489,000 out of net income of $5 million. What would the firm's retention ratio be?

A policy of a firm paying out only funds that are left over after all positive NPV projects are funded.

Which of the following is the primary goal of a firm?

A firm has retained earnings of $6 million, a common shares account of $3 million, and additional paid-in-capital of $6 million, and the firm just paid a 10 percent stock dividend. Assume that fair market value is reflected in the relative size of both the common shares account and the additional paid-in-capital account. What are the new levels in each account?

CJ Corp. is expected to pay a dividend of $10.00 per year indefinitely. If the appropriate rate of return on this stock is 15 percent per year, and the stock consistently goes ex-dividend 25 days before dividend payment date, what will be the expected minimum price in light of the dividend payment logistics?

This is the date the firm sends dividends out to the shareholders.

TJ Corp. is expected to pay a dividend of $3.00 per year indefinitely. If the appropriate rate of return on this stock is 10 percent per year, and the stock consistently goes ex-dividend 45 days before dividend payment date, what will be the expected minimum price in light of the dividend payment logistics?

Cups N Saucers, Inc. normally pays a quarterly dividend. The last such dividend paid was $1.00, all future quarterly dividends are expected to grow at 7 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 $3.00 per share that is not expected to affect any other future dividends, what should the stock price be?

The Modigliani and Miller's Dividend Irrelevance Theorem is set in a "perfect world." List the four elements that are features of their "perfect world."

Suppose a firm has a retention ratio of 33 percent and net income of $6.25 million. How much does it pay out in dividends?

Suppose a firm has a retention ratio of 15 percent, net income of $60 million, and 15 million shares outstanding. What would be the dividend per share paid out on the firm's stock?

The Jobs and Growth Tax Relief Reconciliation Act of 2003 changed which of the following?

This is when the Board of Directors announces its intention to pay a dividend.

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

This refers to the fact that, in real life, investors do NOT have identical desires about taxability and timing of firm payouts.

Explain the residual dividend model.

PQR Corp. is expected to pay a dividend of $1.50 per year indefinitely. If the appropriate rate of return on this stock is 8 percent per year, and the stock consistently goes ex-dividend 25 days before dividend payment date, what will be the expected minimum price in light of the dividend payment logistics?

A pro-rata distribution of additional shares to stock to the current owners of the stock is which of the following?