Exam 17: Payout Policy

B Corp has announced four dates (payment date,ex-dividend date,announcement date and record date)associated with its forthcoming dividend.The dates are August 1,October 1,August 30 and August 28.Which one of these dates is the record date and which is the ex-dividend date?

Dividends are paid to all shareholders who are recorded in its books on the record date.

Stock A has a dividend yield of 8% but no capital gain.Stock B offers a capital gain but no dividend.If a corporate investor in the 35% tax bracket earns the same after-tax return from the two stocks,what capital gain does B offer?

The date on which actual dividend checks are mailed to shareholders is the:

MM's proposition concerning dividends contends that shareholders will:

Market imperfections may make the choice between dividends and repurchases relevant.Which of the following is not one of these imperfections?

Which one of the following is correct for a firm with $400,000 in net earnings,50,000 shares,and a 30% payout ratio?

Companies can pay out cash to their shareholders in two ways.They can pay a dividend or they can buy back some of their outstanding shares.

How are investors most apt to interpret a reduction in a firm's regular dividend payment?

With respect to the proposition that dividend policy does not matter,in order to raise an additional $5,600 in cash by issuing stock,the stock sold must be worth:

Kappa Corp and Lambda Corp are identical except that Kappa pays a dividend of $5 per share,while Lambda pays no dividend and uses the cash to repurchase stock.Peter Berngarten owns 100 shares of Kappa.How could he raise the same amount of spending money if instead he owned 100 shares of Lambda?

Why are dividend changes rather than the absolute level of dividends perceived to be more important to managers and shareholders?

A firm has current assets of $1.2 million,fixed assets of $3.6 million,and debt of $2.2 million.There are 250,000 shares of stock outstanding.What will be the book value of equity if the firm repurchases 10% of its outstanding shares for $10.40 a share?

Stock repurchases:

A dividend increase may be used as __________ of a firm's __________.

What is the difference in the one-year after-tax returns on the following two stocks,assuming a 40% tax rate on dividends and a 20% tax rate on capital gains? Stock A is purchased for $50,pays a $2.5 dividend at the end of the year,and is then sold for $56; stock B is purchased for $60,pays no dividend,but is sold after one year for $70.

A dividend will be paid to shareholders on Friday,May 9.To receive this dividend you must purchase the stock no later than:

Corporate dividends are less volatile than corporate earnings.

The longer an investor waits to take capital gains,the lower is the present value of the tax liability.

Kappa Corp has just raised its dividend from $2.50 to $5 per share.(It plans to reduce its repurchases by a similar amount.)Caterina Chekov,who owns 100 shares of Kappa does not need the extra cash.What can she do to offset the change in dividend policy?