Exam 17: Dividends and Payout Policy

You own 1,000 shares of stock in Avondale Corporation.You will receive an 80-cent per share dividend in one year.In two years,Avondale will pay a liquidating dividend of $40 per share.The required return on Avondale stock is 14 percent.What will your dividend income be this year if you use homemade dividends to create two equal annual dividend payments?

Which two of the following are the best justifications for a reverse stock split? I.combine a reverse stock split with a stock repurchase to enable a firm to go dark II.increase the respectability of the stock III.avoid delisting IV.reduce transaction costs for shareholders

Automatic dividend reinvestment plans: I.require that stockholders reinvest all of the dividends to which they are entitled. II.sometimes grant shareholders the privilege of purchasing additional shares at a discounted price. III.help shareholders create their own homemade dividend policies. IV.help make corporate dividend policies irrelevant to individual stockholders.

Explain the meaning of the dividend clientele effect and why it is important.

On July 7,you purchased 500 shares of Wagoneer,Inc.stock for $21 a share.On August 1,you sold 200 shares of this stock for $28 a share.You sold an additional 100 shares on August 17 at a price of $25 a share.The company declared a $0.95 per share dividend on August 4 to holders of record as of Wednesday,August 15.This dividend is payable on September 1.How much dividend income will you receive on September 1 as a result of your ownership of Wagoneer stock?

A firm wants to maintain a minimum stock price of $15 a share.Due to a recent market downturn,the stock is currently selling for $6 a share.The firm should consider a:

Identify some real-world factors which might make it more difficult for an individual to effectively create a homemade dividend policy.

Which one of the following involves a payment in shares by a stock issuer that increases the number of shares a shareholder owns but also decreases the value per share?

Glendale Paving currently has 120,000 shares of stock outstanding that sell for $54 per share.Assume no market imperfections or tax effects exist.What will the new share price be if the firm declares a 40 percent stock dividend?

Which one of the following is a result of a stock repurchase?

Which one of the following statements related to stock repurchases is correct?

The Turtle Cave currently has 160,000 shares of stock outstanding that sell for $60 per share.Assume no market imperfections or tax effects exist.What will the new share price be if the firm declares a 10 percent stock dividend?

Which of the following account balance changes occur as a result of a large stock dividend? I.increase in common stock II.decrease in capital in excess of par III.increase in capital in excess of par IV.decrease in retained earnings

Delaware Trust has 450 shares of common stock outstanding at a market price per share of $27.Currently,the firm has excess cash of $400,total assets of $28,900,and net income of $1,320.The firm has decided to pay out all of its excess cash as a cash dividend.What will the earnings per share be after this dividend is paid?

Which one of the following is a direct result of a 2-for-1 stock split?

The Peanut Shack has 6,5000 shares of stock outstanding with a par value of $1 per share.The current market value of the firm is $145,600.The company just announced a 3-for-2 stock split.What will the market price per share be after the split?

Which of the following balance sheet accounts are affected by a small stock dividend? I.cash II.common stock III.retained earnings IV.capital in excess of par value

The Green Fiddle has declared a $5 per share dividend.Suppose capital gains are not taxed,but dividends are taxed at 15 percent.New IRS regulations require that taxes be withheld at the time the dividend is paid.Green Fiddle stock sells for $71.50 per share,and the stock is about to go ex-dividend.What will the ex-dividend price be?

Purvis Lawn Products has 18,000 shares of stock outstanding at a market price of $5.50 a share.What will the market price per share be if the company does a 1-for-4 reverse stock split?

Kate purchased 500 shares of Fast Deliveries stock on Wednesday,July 7^th.Ted purchased 100 shares of Fast Deliveries stock on Thursday,July 8^th.Fast Deliveries declared a dividend on June 20^th to shareholders of record on July 12^th and payable on August 1^st.Which one of the following statements concerning the dividend paid on August 1^st is correct given this information?