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

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 $4, it is exactly one quarter until the first quarterly dividend from that $1, the effective annual required rate of return on the company's stock is 14 percent, and all future "annual" dividends are expected to grow at 7 percent per year indefinitely, how much will this stock be worth?

Suppose a firm has a retention ratio of 85 percent and net income of $225 million. How much does it pay out in dividends?

When does a dividend become a firm obligation?

Which of the following argues that dividends that the firm has committed to pay are less risky to risk-averse investors than are potential future capital gains?

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?

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

GB Inc. is planning on announcing a 4-for-1 stock split. The stock is currently trading at $25 per share. Based on this information, what will be the new stock price?

The bird-in-the-hand fallacy refers to:

Suppose a firm has a retention ratio of 10 percent, net income of $40 million, and 4 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 33 percent and net income of $6.25 million. How much does it pay out in dividends?

For most investors, the equalization of the tax rates on capital gains and dividends did which of the following?

Which of the following is when the Board of Directors announces its intention to pay a dividend?

Which of the following is true regarding the information effect of dividend policies?

What will happen to the price of the stock once the stock goes ex-dividend?

Suppose a firm pays total dividends of $100,000 out of net income of $1 million. What would the firm's payout ratio be?

Which of the following is the tendency of investors to find a payout policy that they prefer and stick with it?

ABC Corp. is expected to pay a dividend of $5.00 per year indefinitely. If the appropriate rate of return on this stock is 5 percent per year, and the stock consistently goes ex-dividend 45 days before the dividend payment date, what will be the expected maximum price in light of the dividend payment logistics?

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 the dividend payment date, what will be the expected minimum price in light of the dividend payment logistics?

Suppose a firm has a retention ratio of 55 percent and net income of $7 million. How much does it pay out in dividends?

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: