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

Show mathematically that,with a tax rate on both dividends and capital gains of 10 percent,it doesn't matter whether earnings are paid out as dividends or kept in the firm to cause g to grow for a constant-dividend stock.

What type of clientele would you expect to prefer dividends over capital gains? Why?

If a firm has retained earnings of $40 million,a common shares account of $50 million,and additional paid-in-capital of $25 million,how much would be transferred in (or out)of these accounts in response to a 40 percent stock dividend,respectively?

Which of the following can be a benefit of the clientele effect?

Suppose a firm has a retention ratio of 35 percent,net income of $35 million,and 10 million shares outstanding.What would be the dividend per share paid out on the firm's stock?

Suppose a firm has a retention ratio of 10 percent,net income of $40 million,and 4 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 47 percent and net income of $7 million.What would be the annual addition to retained earnings?

GBH Inc.is planning on announcing a 2-for-5 stock split.The stock is currently trading at $12 per share.Based on this information,what will be the new stock price?

What important tax-based reason suggests why some investors might prefer capital gains?

The theory that argues that dividends that the firm has committed to pay are less risky to risk-averse investors than are potential future capital gains is referred to as:

Everything else held constant,if a firm announces that it will double the length of time between its ex-dividend date and its payment date,what should be the effect on stock price?