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?

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?

Wheels and More, Inc. normally pays an annual dividend. The last such dividend paid was $3.00, all future dividends are expected to grow at a rate of 8 percent per year, and the firm faces a required rate of return on equity of 12 percent. If the firm just announced that the next dividend will be an extraordinary dividend of $7 per share that is not expected to affect any other future dividends, what should the stock price be?

Suppose a firm pays total dividends of $35,000 out of net income of $50,000. What would the firm's retention ratio be?

Regarding dividend payment procedures, which of the following is the date the firm would look on its books to find to whom they can start addressing payments?

Suppose a firm pays total dividends of $250,000 out of net income of $2 million. What would the firm's payout ratio be?

Suppose a firm pays total dividends of $25,000 out of net income of $100,000. What would the firm's payout ratio be?

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?

Modigliani and Miller disagreed with the proposal by Gordon and Lintner regarding dividends. Why?

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

Regarding dividend payment procedures, which of the following is the first day that the shares will be traded without the dividend attached?

If a firm has retained earnings of $40 million, a common shares account of $50 million, and additional paid-in-capital of $25 million, how much would be transferred in (or out) of these accounts in response to a 40 percent stock dividend, respectively?

Which of the following is a repurchase where the firm simply buys shares of its own stock on the stock market just like any other investor would?

LMNOP Cos. normally pays an annual dividend. The last such dividend paid was $5.00, all future dividends are expected to grow at a rate of 5 percent per year, 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 $10 per share that is not expected to affect any other future dividends, what should the stock price be?

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?

Suppose a firm pays total dividends of $200,000 out of net income of $2.5 million. What would the firm's payout ratio be?

Sky, Inc. normally pays a quarterly dividend. The last such dividend paid was $2.50, all future quarterly dividends are expected to grow at 4 percent, and the firm faces a required rate of return on equity of 16.5 percent. If the firm just announced that the next dividend will be an extraordinary dividend of $10.00 per share that is not expected to affect any other future dividends, what should the stock price be?