Question 1

A small stock dividend is generally defined as a stock dividend of less than ________ percent.

Accepted Answer

A) 10 to 15 
B) 15 to 20 
C) 20 to 25 
D) 25 to 30 
E) 30 to 35 
A) 10 to 15 
B) 15 to 20 
C) 20 to 25 
D) 25 to 30 
E) 30 to 35

Question 2

A firm has a total market value of $89,600 with 6,500 shares of stock outstanding.What will be the total market value of the firm if it does a 1-for-2 reverse stock split?

Accepted Answer

A) $179,200 
B) $148,300 
C) $122,300 
D) $89,600 
E) $44,800 
A) $179,200 
B) $148,300 
C) $122,300 
D) $89,600 
E) $44,800

Question 3

According to the clientele effect,firms can only boost their stock price:

Accepted Answer

A) by increasing the dividend payout ratio. 
B) by increasing their regular cash dividends. 
C) by setting their dividend to the level expected by the highest-dividend-receiving satisfied clientele group. 
D) by commencing dividend payments if they are a non-dividend-paying firm. 
E) if an unsatisfied clientele group exists. 
A) by increasing the dividend payout ratio. 
B) by increasing their regular cash dividends. 
C) by setting their dividend to the level expected by the highest-dividend-receiving satisfied clientele group. 
D) by commencing dividend payments if they are a non-dividend-paying firm. 
E) if an unsatisfied clientele group exists.

Question 4

Kelso's balance sheet shows $15,000 in the common stock account,$315,000 in the capital in excess of par account,and $189,000 in the retained earnings account.The firm just announced a 3-for-2 stock split.What will be the value of the common stock account after the split if the par value per share is $1?

Accepted Answer

A) $10,000 
B) $12,500 
C) $15,000 
D) $18,500 
E) $22,500 
A) $10,000 
B) $12,500 
C) $15,000 
D) $18,500 
E) $22,500

Question 5

Samuel's has 42,000 shares of stock outstanding with a par value of $1 per share and a market price per share of $41.The balance sheet shows $1,358,000 in the capital in excess of par account and $2,212,500 in the retained earnings account.The firm just announced a stock dividend of 50 percent.What is the value of the capital in excess of par account after the dividend?

Accepted Answer

A) $1,358,000 
B) $612,500 
C) $518,000 
D) $497,000 
E) $221,900 
A) $1,358,000 
B) $612,500 
C) $518,000 
D) $497,000 
E) $221,900

Question 6

The Saw Mill has shares of stock outstanding with a par value of $1 per share and a market-to-book ratio of 2.1.The balance sheet shows $5,000 in the common stock account,$58,000 in the capital in excess of par account,and $32,500 in the retained earnings account.The firm just announced a stock dividend of 50 percent.What is the book value of the common stock account after the dividend?

Accepted Answer

A) $10,000 
B) $8,500 
C) $9,000 
D) $7,500 
E) $5,000 
A) $10,000 
B) $8,500 
C) $9,000 
D) $7,500 
E) $5,000

Question 7

A scenario exists that supports an argument in favor of a low dividend policy when:

Accepted Answer

A) tax laws allow capital gains to be deferred until the gain is realized. 
B) few,if any,positive net present value projects are available to a firm. 
C) a preponderance of stockholders have minimal taxable income. 
D) the majority of the stockholders have other investment opportunities that offer higher rewards with similar risk characteristics. 
E) corporate tax rates exceed personal tax rates. 
A) tax laws allow capital gains to be deferred until the gain is realized. 
B) few,if any,positive net present value projects are available to a firm. 
C) a preponderance of stockholders have minimal taxable income. 
D) the majority of the stockholders have other investment opportunities that offer higher rewards with similar risk characteristics. 
E) corporate tax rates exceed personal tax rates.

Question 8

Davidsons has 15,000 shares of stock outstanding with a par value of $1 per share and a market value of $45 per share.The balance sheet shows $15,000 in the common stock account,$158,000 in the capital in excess of par account,and $132,500 in the retained earnings account.The firm just announced a stock dividend of 50 percent.What is the value of the retained earnings account after the dividend?

Accepted Answer

A) $125,000 
B) $117,500 
C) $132,500 
D) $140,000 
E) $147,500 
A) $125,000 
B) $117,500 
C) $132,500 
D) $140,000 
E) $147,500

Question 9

Nu Tech is a technology firm with good growth prospects.The firm wishes to do something to acknowledge the loyalty of its shareholders but needs all its available cash to fund its rapid growth.The market price of its stock is currently trading in the upper end of its preferred trading range.The firm could consider:

Accepted Answer

A) a liquidating dividend. 
B) an extra cash dividend. 
C) a reverse stock split. 
D) a stock dividend. 
E) a cash distribution. 
A) a liquidating dividend. 
B) an extra cash dividend. 
C) a reverse stock split. 
D) a stock dividend. 
E) a cash distribution.

Question 10

The annual dividend per share stated as a percentage of the annual earnings per share is called the:

Accepted Answer

A) dividend yield. 
B) dividend per share. 
C) annual yield. 
D) dividend rate. 
E) dividend payout. 
A) dividend yield. 
B) dividend per share. 
C) annual yield. 
D) dividend rate. 
E) dividend payout.

Question 11

You own 200 shares of Loner stock.The firm announced that it will be issuing a dividend of $.20 a share one year from today followed by a final liquidating dividend of $1.60 a share two years from today.If you can earn 7 percent on your funds,what will be the value of your total investment income in two years if you do not want to receive any funds until then?

Accepted Answer

A) $362.80 
B) $266.67 
C) $302.30 
D) $348.04 
E) $247.78 
A) $362.80 
B) $266.67 
C) $302.30 
D) $348.04 
E) $247.78

Question 12

Which one of these statements is correct?

Accepted Answer

A) In the U.S.economy,dividends are quite insignificant. 
B) Over the last few decades,the percentage of U.S.firms paying dividends has increased. 
C) The tax law change in May 2003 is cited as one reason why the percentage of dividend payers has decreased in the U.S. 
D) Dividends are more tax-advantaged than capital gains as of 2017. 
E) Much of the dividend income paid in the U.S.is related to a relatively small number of firms. 
A) In the U.S.economy,dividends are quite insignificant. 
B) Over the last few decades,the percentage of U.S.firms paying dividends has increased. 
C) The tax law change in May 2003 is cited as one reason why the percentage of dividend payers has decreased in the U.S. 
D) Dividends are more tax-advantaged than capital gains as of 2017. 
E) Much of the dividend income paid in the U.S.is related to a relatively small number of firms.

Question 13

Assume a firm has a market value equal to its book value,excess cash of $900,other assets of $16,500,and equity valued at $17,400.The firm has 1,200 shares of stock outstanding and net income of $15,400.If the firm spends all of its excess cash on share repurchases,how many shares will be outstanding after the repurchases are completed? (Round your answer up to the nearest whole share)

Accepted Answer

A) 1,148 shares 
B) 1,135 shares 
C) 1,138 shares 
D) 1,164 shares 
E) 1,142 shares 
A) 1,148 shares 
B) 1,135 shares 
C) 1,138 shares 
D) 1,164 shares 
E) 1,142 shares

Question 14

Financial executives place the greatest importance on which one of these factors when setting dividend policy?

Accepted Answer

A) Setting a high-dividend payout ratio even when earnings are unstable 
B) Maintaining a consistent dividend policy 
C) Increasing current dividends even if those dividends need to be lowered in the near future 
D) Reducing dividends anytime future earnings are in doubt 
E) Attracting institutional investors 
A) Setting a high-dividend payout ratio even when earnings are unstable 
B) Maintaining a consistent dividend policy 
C) Increasing current dividends even if those dividends need to be lowered in the near future 
D) Reducing dividends anytime future earnings are in doubt 
E) Attracting institutional investors

Question 15

A one-for-four reverse stock split will:

Accepted Answer

A) increase the par value by 25 percent. 
B) increase the number of shares outstanding by 400 percent. 
C) increase the market value but not affect the par value per share. 
D) increase a $1 par value to $4. 
E) increase a $1 par value by $4. 
A) increase the par value by 25 percent. 
B) increase the number of shares outstanding by 400 percent. 
C) increase the market value but not affect the par value per share. 
D) increase a $1 par value to $4. 
E) increase a $1 par value by $4.

Question 16

The Tinslow Co.has 125,000 shares of stock outstanding at a market price of $93 a share.The company has just announced a 5-for-2 stock split.How many shares of stock will be outstanding after the split?

Accepted Answer

A) 50,000 
B) 75,000 
C) 156,250 
D) 175,000 
E) 312,500 
A) 50,000 
B) 75,000 
C) 156,250 
D) 175,000 
E) 312,500

Question 17

A firm can repurchase its shares in all the following ways except through:

Accepted Answer

A) a tender offer. 
B) a reverse stock split. 
C) a targeted repurchase. 
D) open market purchases. 
E) a Dutch auction. 
A) a tender offer. 
B) a reverse stock split. 
C) a targeted repurchase. 
D) open market purchases. 
E) a Dutch auction.

Question 18

Stock splits are often used to:

Accepted Answer

A) adjust the market price of a stock such that it falls within a preferred trading range. 
B) decrease the excess cash held by a firm. 
C) increase both the number of shares outstanding and the market price per share. 
D) increase the total equity of a firm. 
E) adjust the debt-equity ratio such that it falls within a preferred range. 
A) adjust the market price of a stock such that it falls within a preferred trading range. 
B) decrease the excess cash held by a firm. 
C) increase both the number of shares outstanding and the market price per share. 
D) increase the total equity of a firm. 
E) adjust the debt-equity ratio such that it falls within a preferred range.

Question 19

Murphy's has shares of stock outstanding with a par value of $1 per share and a market value of $24.60 per share.The balance sheet shows $32,500 in the capital in excess of par account,$12,000 in the common stock account,and $68,700 in the retained earnings account.The firm just announced a stock dividend of 10 percent.What will be the balance in the retained earnings account after the dividend?

Accepted Answer

A) $39,180 
B) $48,300 
C) $59,120 
D) $67,520 
E) $40,380 
A) $39,180 
B) $48,300 
C) $59,120 
D) $67,520 
E) $40,380

Question 20

A stock split:

Accepted Answer

A) increases the total book value of the common stock account. 
B) decreases the book value of the retained earnings account. 
C) does not affect the total book value of any of the equity accounts. 
D) increases the book value of the capital in excess of par account. 
E) decreases the total owners' equity on the balance sheet. 
A) increases the total book value of the common stock account. 
B) decreases the book value of the retained earnings account. 
C) does not affect the total book value of any of the equity accounts. 
D) increases the book value of the capital in excess of par account. 
E) decreases the total owners' equity on the balance sheet.

Exam 19: Dividends and Other Payouts

A small stock dividend is generally defined as a stock dividend of less than ________ percent.

A firm has a total market value of $89,600 with 6,500 shares of stock outstanding.What will be the total market value of the firm if it does a 1-for-2 reverse stock split?

According to the clientele effect,firms can only boost their stock price:

A scenario exists that supports an argument in favor of a low dividend policy when:

The annual dividend per share stated as a percentage of the annual earnings per share is called the:

Which one of these statements is correct?

Financial executives place the greatest importance on which one of these factors when setting dividend policy?

A one-for-four reverse stock split will:

The Tinslow Co.has 125,000 shares of stock outstanding at a market price of $93 a share.The company has just announced a 5-for-2 stock split.How many shares of stock will be outstanding after the split?

A firm can repurchase its shares in all the following ways except through:

Stock splits are often used to:

A stock split:

Introduction to Corporate Finance

Financial Statements and Cash Flow

Financial Statements and Cash Flow

Discounted Cash Flow Valuation

Net Present Value and Other Investment Rules

Making Capital Investment Decisions

Risk Analysis, real Options, and Capital Budgeting

Interest Rates and Bond Valuation

Stock Valuation

Lessons From Market History

Return, risk, and the Capital Asset Pricing Model Capm

An Alternative View of Risk and Return: the Arbitrage Pricing Theory

Risk, cost of Capital, and Valuation

Efficient Capital Markets and Behavioral Challenges

Long-Term Financing

Capital Structure: Basic Concepts

Capital Structure: Limits to the Use of Debt

Valuation and Capital Budgeting for the Levered Firm

Raising Capital

Leasing

Options and Corporate Finance

Options and Corporate Finance: Extensions and Applications

Warrants and Convertibles

Derivatives and Hedging Risk

Short-Term Finance and Planning

Cash Management

Credit and Inventory Management

Mergers,acquisitions,and Divestitures

Financial Distress

International Corporate Finance

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