Exam 17: Sharing Firm Wealth: Dividends, share Repurchases and Other Payouts

Suppose that a firm always announces a yearly dividend at the end of the first quarter of the year,but then pays the dividend out as four equal quarterly payments.If the next such "annual" dividend has been announced as $2,it is exactly one quarter until the first quarterly dividend from that $2,the effective annual required rate of return on the company's stock is 15 percent,and all future "annual" dividends are expected to grow at 10 percent per year indefinitely,how much will this stock be worth?

Which of the following would cause dividends to decrease if the firm was using the residual dividend model?

Candy Town,Inc.normally pays a quarterly dividend.The last such dividend paid was $2.00,all future quarterly dividends are expected to grow at 10 percent,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 $5.00 per share that is not expected to affect any other future dividends,what should the stock price be?

Analyze a firm's decision to distribute constant ordinary dividends or extraordinary dividends.

ABC Corp.is expected to pay a dividend of $5.00 per year indefinitely.If the appropriate rate of return on this stock is 5 percent per year,and the stock consistently goes ex-dividend 45 days before dividend payment date,what will be the expected minimum price in light of the dividend payment logistics?

What will happen to the price of the stock once the stock goes ex-dividend?

A firm has retained earnings of $11 million,a common shares account of $2 million,and additional paid-in-capital of $6 million,and the firm just paid a 15 percent stock dividend.Assume that fair market value is reflected in the relative size of both the common shares account and the additional paid-in-capital account.Which of the following statements is correct?

Suppose a firm has a retention ratio of 25 percent,net income of $21 million,and 3 million shares outstanding.What would be the dividend per share paid out on the firm's stock?

The bird-in-the-hand fallacy refers to:

The board of directors announces its intention to pay a dividend on the:

Which of the following is a reason for a firm to announce a stock split?

A firm has retained earnings of $11 million,a common shares account of $2 million,and additional paid-in-capital of $6 million,and the firm just paid a 5 percent stock dividend.Assume that fair market value is reflected in the relative size of both the common shares account and the additional paid-in-capital account.Which of the following statements is correct?

Which of these is the idea that it does not matter whether a firm pays dividends or not as derived from a Modigliani and Miller Theorem?

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?

Which of the following is the tendency of investors to find a payout policy that they prefer and stick with it?

Suppose a firm pays total dividends of $125,000 out of net income of $500,000.What would the firm's retention ratio be?

Explain the residual dividend model.

PQR Corp.is expected to pay a dividend of $1.50 per year indefinitely.If the appropriate rate of return on this stock is 8 percent per year,and the stock consistently goes ex-dividend 25 days before dividend payment date,what will be the expected minimum price in light of the dividend payment logistics?

ABC Corp.is expected to pay a dividend of $5.00 per year indefinitely.If the appropriate rate of return on this stock is 5 percent per year,and the stock consistently goes ex-dividend 45 days before dividend payment date,what will be the expected maximum price in light of the dividend payment logistics?

Suppose a firm has a retention ratio of 35 percent and net income of $2 million.How much does it pay out in dividends?