Question 1

Which of the following is true regarding The Information Effect of dividend policies?

Accepted Answer

A)  Increases in dividends are seen as negative signals concerning the firm's performance. 
B)  Increases in dividends are seen as negative signals concerning the firm's expected future cash flow levels. 
C)  If a firm announces an increase in the next dividend, analysts see such announcements as a very positive signal. 
D)  If a firm announces an increase in the next dividend, analysts see such announcements as a very negative signal. 
A)  Increases in dividends are seen as negative signals concerning the firm's performance. 
B)  Increases in dividends are seen as negative signals concerning the firm's expected future cash flow levels. 
C)  If a firm announces an increase in the next dividend, analysts see such announcements as a very positive signal. 
D)  If a firm announces an increase in the next dividend, analysts see such announcements as a very negative signal.

Question 2

Suppose a firm has a retention ratio of 25 percent, net income of $21 million, and 3 million shares outstanding. What would be the dividend per share paid out on the firm's stock?

Accepted Answer

A)  $0.14 
B)  $1.75 
C)  $5.25 
D)  $7.00 
A)  $0.14 
B)  $1.75 
C)  $5.25 
D)  $7.00

Question 3

Which of the following statements is correct?

Accepted Answer

A)  A stock's price will increase upon announcing a dividend. 
B)  Stock repurchases increase the number of shares. 
C)  Paying a fixed percentage of net income is consistent with the clientele effect. 
D)  None of these 
A)  A stock's price will increase upon announcing a dividend. 
B)  Stock repurchases increase the number of shares. 
C)  Paying a fixed percentage of net income is consistent with the clientele effect. 
D)  None of these

Question 4

The first day that the shares will trade without the dividend attached is referred to as the ___________.

Accepted Answer

A)  Dividend date 
B)  Declaration date 
C)  Record date 
D)  None of these 
A)  Dividend date 
B)  Declaration date 
C)  Record date 
D)  None of these

Question 5

Why might a firm announce a reverse stock split?

Accepted Answer

Reverse stock splits increase

Question 6

Everything else held constant, if a firm announces that it will double the length of time between its ex-dividend date and its payment date, what should be the effect on stock price?

Accepted Answer

If N is the previous number of days betw

Question 7

This is an offer announced publicly that specifies in advance a single purchase price, the number of shares sought, and the duration of the offer.

Accepted Answer

A)  fixed-price tender offer 
B)  fixed-duration tender offer 
C)  fixed-shares tender offer 
D)  open-market stock repurchase 
A)  fixed-price tender offer 
B)  fixed-duration tender offer 
C)  fixed-shares tender offer 
D)  open-market stock repurchase

Question 8

If a firm has retained earnings of $10 million, a common shares account of $15 million, and additional paid-in-capital of $5 million, how much would be transferred in (or out) of these accounts in response to a 50 percent stock dividend, respectively?

Accepted Answer

A)  -100%, 0%, +100% 
B)  -100%, +100%, 0% 
C)  -100%, +50%, +50% 
D)  -50%, +50%, +50% 
A)  -100%, 0%, +100% 
B)  -100%, +100%, 0% 
C)  -100%, +50%, +50% 
D)  -50%, +50%, +50%

Question 9

Suppose a firm pays total dividends of $125,000 out of net income of $500,000. What would the firm's retention ratio be?

Accepted Answer

A)  22.00% 
B)  69.00% 
C)  25.00% 
D)  75.00% 
A)  22.00% 
B)  69.00% 
C)  25.00% 
D)  75.00%

Question 10

Regarding dividend payment procedures, this is the date the firm would look on its books to find to whom they can start addressing payments.

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 11

List and define the definitive set of four dates associated with a firm paying out a dividend.

Accepted Answer

1. Declaration date: the date the Board

Question 12

This is the idea that it does not matter whether a firm pays dividends or not as derived from a Modigliani and Miller Theorem.

Accepted Answer

A)  Dividend Indifference Theory 
B)  Dividend Irrelevance Theorem 
C)  Shareholder Maximization Theorem 
D)  Shareholder Rationalization Theorem 
A)  Dividend Indifference Theory 
B)  Dividend Irrelevance Theorem 
C)  Shareholder Maximization Theorem 
D)  Shareholder Rationalization Theorem

Question 13

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 uses less debt in its capital structure. 
C)  Net income decreases. 
D)  All of these would cause dividends to decrease. 
A)  The firm has more positive NPV projects. 
B)  The firm uses less debt in its capital structure. 
C)  Net income decreases. 
D)  All of these would cause dividends to decrease.

Question 14

Suppose that a firm always announces a yearly dividend at the end of the first quarter of the year, but then pays the dividend out as four equal quarterly payments. If the next such "annual" dividend has been announced as $2, it is exactly one quarter until the first quarterly dividend from that $2, the effective annual required rate of return on the company's stock is 15 percent, and all future "annual" dividends are expected to grow at 10 percent per year indefinitely, how much will this stock be worth?

Accepted Answer

A)  $40.00 
B)  $41.83 
C)  $42.00 
D)  $42.09 
A)  $40.00 
B)  $41.83 
C)  $42.00 
D)  $42.09

Question 15

JEN Corp. is expected to pay a dividend of $2.00 per year indefinitely. If the appropriate rate of return on this stock is 12 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?

Accepted Answer

A)  $1.14 
B)  $16.54 
C)  $16.67 
D)  $18.52 
A)  $1.14 
B)  $16.54 
C)  $16.67 
D)  $18.52

Question 16

Explain the residual dividend model.

Accepted Answer

This model, which is rarely us

Question 17

In 2004, Microsoft paid one of the largest extraordinary dividends in history. All of the following contributed to this historical event except ___________________.

Accepted Answer

A)  The Jobs & Growth Tax Relief Reconciliation Act (JGTRR
A)  of 2003 made the tax rate less burdensome to investors. 
B)  Microsoft was interested in changing its capital structure. 
C)  Microsoft had a lot of cash on its balance sheet. 
D)  Microsoft was not making significant investment in capital budgeting projects as compared to its cash balance. 
A)  The Jobs & Growth Tax Relief Reconciliation Act (JGTRR
A)  of 2003 made the tax rate less burdensome to investors. 
B)  Microsoft was interested in changing its capital structure. 
C)  Microsoft had a lot of cash on its balance sheet. 
D)  Microsoft was not making significant investment in capital budgeting projects as compared to its cash balance.

Question 18

Which of the following statements is correct?

Accepted Answer

A)  Generally speaking, investors interpret a firm's decision to repurchase their own stock as a positive signal. 
B)  A stock repurchase may be viewed as a sign that the firm doesn't have enough attractive capital budgeting projects. 
C)  The IRS can impose penalties on a firm if tax authorities can show that the repurchase was performed primarily to avoid dividend taxation. 
D)  All of these are correct. 
A)  Generally speaking, investors interpret a firm's decision to repurchase their own stock as a positive signal. 
B)  A stock repurchase may be viewed as a sign that the firm doesn't have enough attractive capital budgeting projects. 
C)  The IRS can impose penalties on a firm if tax authorities can show that the repurchase was performed primarily to avoid dividend taxation. 
D)  All of these are correct.

Question 19

Why might a firm's investors wish to delay receiving cash from the firm?

Accepted Answer

A)  They might prefer to wait for the firm to split its stock. 
B)  They might prefer to wait until the residual dividend model is employed. 
C)  They might prefer to wait until an extraordinary dividend is paid which is taxed more favorably. 
D)  They might wish to delay receiving cash if they expected to be in a lower tax bracket in the future. 
A)  They might prefer to wait for the firm to split its stock. 
B)  They might prefer to wait until the residual dividend model is employed. 
C)  They might prefer to wait until an extraordinary dividend is paid which is taxed more favorably. 
D)  They might wish to delay receiving cash if they expected to be in a lower tax bracket in the future.

Question 20

The theory that argues that dividends that the firm has committed to pay are less risky to risk-averse investors than are potential future capital gains is referred to as ___________________.

Accepted Answer

A)  Dividend irrelevance theory 
B)  Bird-in-the-hand theory 
C)  Residual dividend model 
D)  None of these 
A)  Dividend irrelevance theory 
B)  Bird-in-the-hand theory 
C)  Residual dividend model 
D)  None of these

Which of the following is true regarding The Information Effect of dividend policies?

Suppose a firm has a retention ratio of 25 percent, net income of $21 million, and 3 million shares outstanding. What would be the dividend per share paid out on the firm's stock?

Which of the following statements is correct?

The first day that the shares will trade without the dividend attached is referred to as the ___________.

Why might a firm announce a reverse stock split?

Everything else held constant, if a firm announces that it will double the length of time between its ex-dividend date and its payment date, what should be the effect on stock price?

This is an offer announced publicly that specifies in advance a single purchase price, the number of shares sought, and the duration of the offer.

If a firm has retained earnings of $10 million, a common shares account of $15 million, and additional paid-in-capital of $5 million, how much would be transferred in (or out) of these accounts in response to a 50 percent stock dividend, respectively?

Suppose a firm pays total dividends of $125,000 out of net income of $500,000. What would the firm's retention ratio be?

Regarding dividend payment procedures, this is the date the firm would look on its books to find to whom they can start addressing payments.

List and define the definitive set of four dates associated with a firm paying out a dividend.

This is the idea that it does not matter whether a firm pays dividends or not as derived from a Modigliani and Miller Theorem.

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

Explain the residual dividend model.

In 2004, Microsoft paid one of the largest extraordinary dividends in history. All of the following contributed to this historical event except ___________________.

Which of the following statements is correct?

Why might a firm's investors wish to delay receiving cash from the firm?

The theory that argues that dividends that the firm has committed to pay are less risky to risk-averse investors than are potential future capital gains is referred to as ___________________.

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

Which of the following is true regarding The Information Effect of dividend policies?

Suppose a firm has a retention ratio of 25 percent, net income of $21 million, and 3 million shares outstanding. What would be the dividend per share paid out on the firm's stock?

Which of the following statements is correct?

The first day that the shares will trade without the dividend attached is referred to as the ___________.

Why might a firm announce a reverse stock split?

Everything else held constant, if a firm announces that it will double the length of time between its ex-dividend date and its payment date, what should be the effect on stock price?

This is an offer announced publicly that specifies in advance a single purchase price, the number of shares sought, and the duration of the offer.

If a firm has retained earnings of $10 million, a common shares account of $15 million, and additional paid-in-capital of $5 million, how much would be transferred in (or out) of these accounts in response to a 50 percent stock dividend, respectively?

Suppose a firm pays total dividends of $125,000 out of net income of $500,000. What would the firm's retention ratio be?

Regarding dividend payment procedures, this is the date the firm would look on its books to find to whom they can start addressing payments.

List and define the definitive set of four dates associated with a firm paying out a dividend.

This is the idea that it does not matter whether a firm pays dividends or not as derived from a Modigliani and Miller Theorem.

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

Explain the residual dividend model.

In 2004, Microsoft paid one of the largest extraordinary dividends in history. All of the following contributed to this historical event except ___________________.

Which of the following statements is correct?

Why might a firm's investors wish to delay receiving cash from the firm?

The theory that argues that dividends that the firm has committed to pay are less risky to risk-averse investors than are potential future capital gains is referred to as ___________________.

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