Question 1

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

Accepted Answer

A) $4 million 
B) $6 million 
C) $10 million 
D) $16.67 million 
A) $4 million 
B) $6 million 
C) $10 million 
D) $16.67 million

Question 2

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

Accepted Answer

A) The general tax rate applicable to corporations 
B) The general tax rate applicable to net capital gains for individuals 
C) The general tax rate applicable to net capital gains for corporations 
D) The general tax rate applicable to foreign corporations 
A) The general tax rate applicable to corporations 
B) The general tax rate applicable to net capital gains for individuals 
C) The general tax rate applicable to net capital gains for corporations 
D) The general tax rate applicable to foreign corporations

Question 3

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 the 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 4

A firm has retained earnings of $11 million, a common shares account of $2 million, and additional paid-in-capital of $6 million, and the firm just paid a 15 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. Which of the following statements is correct?

Accepted Answer

A) Retained earnings will decrease by $1,200,000. 
B) Common shares will increase by $300,000. 
C) Additional paid-in-capital will increase by $900,000. 
D) All of the statements are correct. 
A) Retained earnings will decrease by $1,200,000. 
B) Common shares will increase by $300,000. 
C) Additional paid-in-capital will increase by $900,000. 
D) All of the statements are correct.

Question 5

Which of the following is the date the firm sends dividends out to the shareholders?

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 6

Which of the following is described as a firm buying back shares of its own stock?

Accepted Answer

A) Ex-dividend 
B) Ex-stock purchase 
C) Repurchase or buyback 
D) Repossession 
A) Ex-dividend 
B) Ex-stock purchase 
C) Repurchase or buyback 
D) Repossession

Question 7

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

Accepted Answer

A) Maximize sales 
B) Maximize net income 
C) Maximize earnings per share 
D) Maximize shareholder wealth 
A) Maximize sales 
B) Maximize net income 
C) Maximize earnings per share 
D) Maximize shareholder wealth

Question 8

Which of the following firms is more likely to use extraordinary dividends?

Accepted Answer

A) One with cyclical sales 
B) One with stable sales 
C) Firms with either cyclical or stable sales 
D) Firms with neither cyclical nor stable sales 
A) One with cyclical sales 
B) One with stable sales 
C) Firms with either cyclical or stable sales 
D) Firms with neither cyclical nor stable sales

Question 9

Suppose a firm has a dividend payout ratio of 65 percent and net income of $5 million. What would be the annual addition to retained earnings?

Accepted Answer

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

Question 10

MMK Cos. normally pays an annual dividend. The last such dividend paid was $2.00, all future dividends are expected 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 11

Suppose a firm pays total dividends of $50,000 out of net income of $500,000. What would the firm's payout ratio be?

Accepted Answer

A) 0.10 
B) 1.00 
C) 10.00 
D) 50.00 
A) 0.10 
B) 1.00 
C) 10.00 
D) 50.00

Question 12

Which of the following refers to the fact that, in real life, investors do not have identical desires about taxability and timing of firm payouts?

Accepted Answer

A) Clientele effect 
B) Dividend irrelevance effect 
C) Capital gain theory 
D) Bird-in-the-hand theory 
A) Clientele effect 
B) Dividend irrelevance effect 
C) Capital gain theory 
D) Bird-in-the-hand theory

Question 13

Which of the following is a policy of a firm paying out only funds that are left over after all positive NPV projects are funded?

Accepted Answer

A) Bird-in-the-hand theory 
B) Clientele effect policy 
C) Residual dividend model 
D) Dividend irrelevance theorem 
A) Bird-in-the-hand theory 
B) Clientele effect policy 
C) Residual dividend model 
D) Dividend irrelevance theorem

Question 14

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

Accepted Answer

A) $12.84 
B) $18.61 
C) $18.75 
D) $20.09 
A) $12.84 
B) $18.61 
C) $18.75 
D) $20.09

Question 15

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

Accepted Answer

A) 9.78 percent 
B) 90.22 percent 
C) 81.24 percent 
D) 19.78 percent 
A) 9.78 percent 
B) 90.22 percent 
C) 81.24 percent 
D) 19.78 percent

Question 16

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

Accepted Answer

A) Stock dividend 
B) Stock split 
C) Payment date 
D) Ex-dividend 
A) Stock dividend 
B) Stock split 
C) Payment date 
D) Ex-dividend

Question 17

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 18

Suppose a firm has a dividend payout ratio of 45 percent and net income of $500,000. What would be the annual addition to retained earnings?

Accepted Answer

A) $45,000 
B) $225,000 
C) $275,000 
D) $500,000 
A) $45,000 
B) $225,000 
C) $275,000 
D) $500,000

Question 19

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

Accepted Answer

A) $3.70 
B) $26.68 
C) $29.65 
D) $30.00 
A) $3.70 
B) $26.68 
C) $29.65 
D) $30.00

Question 20

Which of these 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

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

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

Which of the following is the date the firm sends dividends out to the shareholders?

Which of the following is described as a firm buying back shares of its own stock?

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

Which of the following firms is more likely to use extraordinary dividends?

Suppose a firm has a dividend payout ratio of 65 percent and net income of $5 million. What would be the annual addition to retained earnings?

Suppose a firm pays total dividends of $50,000 out of net income of $500,000. What would the firm's payout ratio be?

Which of the following refers to the fact that, in real life, investors do not have identical desires about taxability and timing of firm payouts?

Which of the following is a policy of a firm paying out only funds that are left over after all positive NPV projects are funded?

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

Suppose a firm has a dividend payout ratio of 45 percent and net income of $500,000. What would be the annual addition to retained earnings?

Which of these is the idea that it does not matter whether a firm pays dividends or not as derived from a Modigliani and Miller Theorem?

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 40 percent and net income of $10 million. How much does it pay out in dividends?

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

Which of the following is the date the firm sends dividends out to the shareholders?

Which of the following is described as a firm buying back shares of its own stock?

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

Which of the following firms is more likely to use extraordinary dividends?

Suppose a firm has a dividend payout ratio of 65 percent and net income of $5 million. What would be the annual addition to retained earnings?

Suppose a firm pays total dividends of $50,000 out of net income of $500,000. What would the firm's payout ratio be?

Which of the following refers to the fact that, in real life, investors do not have identical desires about taxability and timing of firm payouts?

Which of the following is a policy of a firm paying out only funds that are left over after all positive NPV projects are funded?

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

Suppose a firm has a dividend payout ratio of 45 percent and net income of $500,000. What would be the annual addition to retained earnings?

Which of these is the idea that it does not matter whether a firm pays dividends or not as derived from a Modigliani and Miller Theorem?

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