Exam 17: Payout Policy

A stock is currently priced at $65 per share and will pay a $4 dividend in one year.What must the stock sell for in one year to meet investors' expectations of a 15% after-tax return if dividends are taxed at 28% and there are no capital gains taxes?

A company is more likely to repurchase stock rather than pay out dividends when the firm:

Which one of these statements is correct?

What is the new share price for a corporation with a current share price of $4 that employs a 2-for-9 reverse split?

An investor owns 300 shares of stock currently selling for $70 per share.After a 3-for-2 stock split,the investor will have:

Stock repurchases may be interpreted by investors as a signal that:

Compare the after-tax returns for a corporation that invests in preferred stock with a 12% dividend yield versus a common stock with no dividend but a 16% capital gain.The corporation's tax rate is 35%.The:

Why may a large increase in earnings not translate into a large increase in dividends?

Which party receives the greatest tax benefit from receiving dividends rather than capital gains?

In MM's analysis,which one of these is not fixed?

Firm X will a dividend of $10 next year and its stock is expected to sell at $100 after the payment.Firm Y pays no dividend but its stock is expected to sell at $110.Dividends are taxed at 30% and capital gains are untaxed.If both stocks offer an after-tax return of 8%,what is the price of the two stocks?

If investors are expecting a dividend cut,then the announcement of the decreased dividend payment will:

Evenglade Corp has 1,000 shares outstanding priced at $10 a share.The company is unsure whether to pay out $1 a share as a dividend or to use the money to repurchase stock.If it pays a dividend,what happens to the stock price? If it repurchases,how many shares will remain and at what price?

Research has shown all of the following to be true of the way corporations determine dividends except:

The manager of XYZ Corp.feels that a dividend increase will increase the stock price because many investors value stock with a dividend-discount model.Why might MM disagree with this assertion?

Under which conditions are shareholders most likely to be concerned about agency conflicts?

With respect to the dividend-payment process,the price of a share of stock can logically be expected to drop on:

A firm has $250,000 to spend on either a one-time special dividend or on a share repurchase program.If the share repurchase is selected,then the firm's:

MM's dividend irrelevance proposition assumes an efficient market with no taxes or issue costs.

Anyone holding a stock before its ex-dividend date is entitled to the dividend.