Question 1

Which of the following is when the Board of Directors announces its intention to pay a dividend?

Accepted Answer

A) Declaration date 
B) Ex-dividend date 
C) Record date 
D) Payment date 
A) Declaration date 
B) Ex-dividend date 
C) Record date 
D) Payment date

Question 2

Suppose a firm pays total dividends of $750,000 out of net income of $2 million.What would the firm's retention ratio be?

Accepted Answer

A) 37.50 percent 
B) 47.50 percent 
C) 25.50 percent 
D) 62.50 percent 
A) 37.50 percent 
B) 47.50 percent 
C) 25.50 percent 
D) 62.50 percent

Question 3

Which of the following is true regarding he information effect of dividend policies?

Accepted Answer

A) Increases in dividends are seen as negative signals concerning the firm's performance. 
B) Increases in dividends are seen as negative signals concerning the firm's expected future cash flow levels. 
C) If a firm announces an increase in the next dividend, analysts see such announcements as a very positive signal. 
D) If a firm announces an increase in the next dividend, analysts see such announcements as a very negative signal. 
A) Increases in dividends are seen as negative signals concerning the firm's performance. 
B) Increases in dividends are seen as negative signals concerning the firm's expected future cash flow levels. 
C) If a firm announces an increase in the next dividend, analysts see such announcements as a very positive signal. 
D) If a firm announces an increase in the next dividend, analysts see such announcements as a very negative signal.

Question 4

If a firm has retained earnings of $20 million,a common shares account of $25 million,and additional paid-in-capital of $15 million,how much would be transferred in (or out)of these accounts in response to a 15 percent stock dividend,respectively?

Accepted Answer

A) -15 percent, 0 percent, +15 percent 
B) -15 percent, +15 percent, 0 percent 
C) -30 percent, +15 percent, +15 percent 
D) -30 percent, +30 percent, +30 percent 
A) -15 percent, 0 percent, +15 percent 
B) -15 percent, +15 percent, 0 percent 
C) -30 percent, +15 percent, +15 percent 
D) -30 percent, +30 percent, +30 percent

Question 5

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 $5,it is exactly one quarter until the first quarterly dividend from that $5,the effective annual required rate of return on the company's stock is 14 percent,and all future "annual" dividends are expected to grow at 4 percent per year indefinitely,how much will this stock be worth?

Accepted Answer

A) $17.10 
B) $50.00 
C) $52.55 
D) $57.00 
A) $17.10 
B) $50.00 
C) $52.55 
D) $57.00

Question 6

The Modigliani and Miller's Dividend Irrelevance Theorem is set in a "perfect world." List the four elements that are features of their "perfect world."

Accepted Answer

1.No taxes
2.No transaction co

Question 7

Which of the following is a repurchase where the firm simply buys shares of its own stock on the stock market just like any other investor would?

Accepted Answer

A) Fixed-price tender offer 
B) Fixed-duration tender offer 
C) Fixed-shares tender offer 
D) Open-market stock repurchase 
A) Fixed-price tender offer 
B) Fixed-duration tender offer 
C) Fixed-shares tender offer 
D) Open-market stock repurchase

Question 8

Suppose a firm pays total dividends of $489,000 out of net income of $5 million.What would the firm's retention ratio be?

Accepted Answer

A) 9.78 percent 
B) 90.22 percent 
C) 81.24 percent 
D) 19.78 percent 
A) 9.78 percent 
B) 90.22 percent 
C) 81.24 percent 
D) 19.78 percent

Question 9

Why might a firm announce a reverse stock split?

Accepted Answer

Reverse stock splits increase

Question 10

JEN Corp.is expected to pay a dividend of $2.00 per year indefinitely.If the appropriate rate of return on this stock is 12 percent per year,and the stock consistently goes ex-dividend 25 days before dividend payment date,what will be the expected maximum price in light of the dividend payment logistics?

Accepted Answer

A) $1.14 
B) $16.54 
C) $16.67 
D) $18.52 
A) $1.14 
B) $16.54 
C) $16.67 
D) $18.52

Question 11

In 2004,Microsoft paid one of the largest extraordinary dividends in history.All of the following contributed to this historical event EXCEPT:

Accepted Answer

A) the Jobs & Growth Tax Relief Reconciliation Act (JGTRR
A)  of 2003 made the tax rate less burdensome to investors. 
B) Microsoft was interested in changing its capital structure. 
C) Microsoft had a lot of cash on its balance sheet. 
D) Microsoft was not making significant investment in capital budgeting projects as compared to its cash balance. 
A) the Jobs & Growth Tax Relief Reconciliation Act (JGTRR
A)  of 2003 made the tax rate less burdensome to investors. 
B) Microsoft was interested in changing its capital structure. 
C) Microsoft had a lot of cash on its balance sheet. 
D) Microsoft was not making significant investment in capital budgeting projects as compared to its cash balance.

Question 12

Suppose a firm pays total dividends of $25,000 out of net income of $100,000.What would the firm's payout ratio be?

Accepted Answer

A) 0.25 
B) 2.50 
C) 4.00 
D) 25.00 
A) 0.25 
B) 2.50 
C) 4.00 
D) 25.00

Question 13

Identify factors that affect a firm's payout policies.

Accepted Answer

Factors include the impact of differenti

Question 14

Why might a firm's investors wish to delay receiving cash from the firm?

Accepted Answer

A) They might prefer to wait for the firm to split its stock. 
B) They might prefer to wait until the residual dividend model is employed. 
C) They might prefer to wait until an extraordinary dividend is paid which is taxed more favorably. 
D) They might wish to delay receiving cash if they expected to be in a lower tax bracket in the future. 
A) They might prefer to wait for the firm to split its stock. 
B) They might prefer to wait until the residual dividend model is employed. 
C) They might prefer to wait until an extraordinary dividend is paid which is taxed more favorably. 
D) They might wish to delay receiving cash if they expected to be in a lower tax bracket in the future.

Question 15

When does a dividend become a firm obligation?

Accepted Answer

A) When the firm declares them 
B) When the firm pays them 
C) When the firm records them 
D) On the ex-dividend date 
A) When the firm declares them 
B) When the firm pays them 
C) When the firm records them 
D) On the ex-dividend date

Question 16

Sky,Inc.normally pays a quarterly dividend.The last such dividend paid was $2.50,all future quarterly dividends are expected to grow at 4 percent,and the firm faces a required rate of return on equity of 16.5 percent.If the firm just announced that the next dividend will be an extraordinary dividend of $10.00 per share that is not expected to affect any other future dividends,what should the stock price be?

Accepted Answer

A) $20.00 
B) $20.80 
C) $26.35 
D) $27.15 
A) $20.00 
B) $20.80 
C) $26.35 
D) $27.15

Question 17

When might raising a firm's dividend payout ratio be viewed as a negative signal?

Accepted Answer

It may be interprete

Question 18

Suppose a firm has a retention ratio of 25 percent,net income of $30 million,and 5 million shares outstanding.What would be the dividend per share paid out on the firm's stock?

Accepted Answer

A) $1.50 
B) $4.50 
C) $6.00 
D) $16.67 
A) $1.50 
B) $4.50 
C) $6.00 
D) $16.67

Question 19

Suppose a firm has a dividend payout ratio of 65 percent and net income of $5 million.What would be the annual addition to retained earnings?

Accepted Answer

A) $3,250,000 
B) $5,250,000 
C) $1,750,000 
D) $750,000 
A) $3,250,000 
B) $5,250,000 
C) $1,750,000 
D) $750,000

Question 20

The Jobs and Growth Tax Relief Reconciliation Act of 2003 changed which of the following?

Accepted Answer

A) The general tax rate applicable to corporations 
B) The general tax rate applicable to net capital gains for individuals 
C) The general tax rate applicable to net capital gains for corporations 
D) The general tax rate applicable to foreign corporations 
A) The general tax rate applicable to corporations 
B) The general tax rate applicable to net capital gains for individuals 
C) The general tax rate applicable to net capital gains for corporations 
D) The general tax rate applicable to foreign corporations

Which of the following is when the Board of Directors announces its intention to pay a dividend?

Suppose a firm pays total dividends of $750,000 out of net income of $2 million.What would the firm's retention ratio be?

Which of the following is true regarding he information effect of dividend policies?

If a firm has retained earnings of $20 million,a common shares account of $25 million,and additional paid-in-capital of $15 million,how much would be transferred in (or out)of these accounts in response to a 15 percent stock dividend,respectively?

The Modigliani and Miller's Dividend Irrelevance Theorem is set in a "perfect world." List the four elements that are features of their "perfect world."

Which of the following is a repurchase where the firm simply buys shares of its own stock on the stock market just like any other investor would?

Suppose a firm pays total dividends of $489,000 out of net income of $5 million.What would the firm's retention ratio be?

Why might a firm announce a reverse stock split?

In 2004,Microsoft paid one of the largest extraordinary dividends in history.All of the following contributed to this historical event EXCEPT:

Suppose a firm pays total dividends of $25,000 out of net income of $100,000.What would the firm's payout ratio be?

Identify factors that affect a firm's payout policies.

Why might a firm's investors wish to delay receiving cash from the firm?

When does a dividend become a firm obligation?

When might raising a firm's dividend payout ratio be viewed as a negative signal?

Suppose a firm has a retention ratio of 25 percent,net income of $30 million,and 5 million shares outstanding.What would be the dividend per share paid out on the firm's stock?

Suppose a firm has a dividend payout ratio of 65 percent and net income of $5 million.What would be the annual addition to retained earnings?

The Jobs and Growth Tax Relief Reconciliation Act of 2003 changed which of the following?

Introduction to Financial Management

Reviewing Financial Statements

Analyzing Financial Statements

Time Value of Money

Time Value of Money

Valuing Bonds

Valuing Stockspart

Characterizing Risk and Return

Estimating Risk and Return

Calculating the Cost of Capital

Estimating Cash Flows on Capital Budgeting Projects

Weighing Net Present Value and Other Capital Budgeting Criteria

Working Capital and Policies

Financial Planning and Forecasting

Assessing Long-Term Debt, equity, and Capital Structure

Issuing Capital and the Investment Banking Process

International Corporate Finance

Mergers and Acquisitions and Financial Distress

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

Which of the following is when the Board of Directors announces its intention to pay a dividend?

Suppose a firm pays total dividends of $750,000 out of net income of $2 million.What would the firm's retention ratio be?

Which of the following is true regarding he information effect of dividend policies?

If a firm has retained earnings of $20 million,a common shares account of $25 million,and additional paid-in-capital of $15 million,how much would be transferred in (or out)of these accounts in response to a 15 percent stock dividend,respectively?

The Modigliani and Miller's Dividend Irrelevance Theorem is set in a "perfect world." List the four elements that are features of their "perfect world."

Which of the following is a repurchase where the firm simply buys shares of its own stock on the stock market just like any other investor would?

Suppose a firm pays total dividends of $489,000 out of net income of $5 million.What would the firm's retention ratio be?

Why might a firm announce a reverse stock split?

In 2004,Microsoft paid one of the largest extraordinary dividends in history.All of the following contributed to this historical event EXCEPT:

Suppose a firm pays total dividends of $25,000 out of net income of $100,000.What would the firm's payout ratio be?

Identify factors that affect a firm's payout policies.

Why might a firm's investors wish to delay receiving cash from the firm?

When does a dividend become a firm obligation?

When might raising a firm's dividend payout ratio be viewed as a negative signal?

Suppose a firm has a retention ratio of 25 percent,net income of $30 million,and 5 million shares outstanding.What would be the dividend per share paid out on the firm's stock?

Suppose a firm has a dividend payout ratio of 65 percent and net income of $5 million.What would be the annual addition to retained earnings?

The Jobs and Growth Tax Relief Reconciliation Act of 2003 changed which of the following?

Introduction to Financial Management

Reviewing Financial Statements

Analyzing Financial Statements

Time Value of Money

Time Value of Money

Valuing Bonds

Valuing Stockspart

Characterizing Risk and Return

Estimating Risk and Return

Calculating the Cost of Capital

Estimating Cash Flows on Capital Budgeting Projects

Weighing Net Present Value and Other Capital Budgeting Criteria

Working Capital and Policies

Financial Planning and Forecasting

Assessing Long-Term Debt, equity, and Capital Structure

Issuing Capital and the Investment Banking Process

International Corporate Finance

Mergers and Acquisitions and Financial Distress

Filters