Exam 17: Payout Policy

A firm has $400 million of assets that includes $50 million of cash and 10 million shares outstanding.If the firm uses $40 million of its cash to repurchase shares,what is the new price per share?

Future investment plans are important determinants of payout policy because of:

When a firm offers to buy its shares at a prespecified price during a short time period it is also known as a(n):

Use the information for the question(s)below. Iota Industries is an all-equity firm with 50 million shares outstanding.Iota has $200 million in cash and expects future free cash flows of $75 million per year.Management plans to use the cash to expand the firm's operations,which in turn will increase future free cash flows by 12%.Iota's cost of capital is 10% and assume that capital markets are perfect. -The value of Iota,if they use the $200 million to expand,is closest to:

Assume that management makes a surprise announcement that JRN will no longer pay dividends but will use the cash to repurchase stock instead.The price of a share of JRN's stock is now closest to:

According to the ________ theory of payout policy,managers pay out cash only when pressured to do so by investors.

The share price falls when a dividend is paid because the reduction in cash decreases the:

Assume that Omicron uses the entire $50 million in excess cash to pay a special dividend.Omicron's ex-dividend price is closest to:

What is greenmail?

Including its cash,Omicron's total market value is closest to:

What is a firm's payout policy?

A one-time payment to shareholders that is much larger than a regular dividend is often referred to as a(n)________ dividend.

The date two business days prior to the date on which all shareholders of record receive a payment is called the ________ date.

The financial manager should:

Apex Analytics is an all-equity firm with 50 million shares outstanding.Apex has $30 million in cash,and expects future free cash flows of $8 million per year.The cash can be used to expand the firm's future operations,increasing future free cash flows to $10 million per year.If Apex's cost of capital for the expansion is 8%,what will be the difference in the firm's share price compared to using the cash for a share repurchase?

Malibu Mannequins is an all-equity firm with 40 million shares outstanding.Malibu has $20 million in cash,and expects future free cash flows of $5 million per year.The cash can be used to expand the firm's future operations,increasing future free cash flows to $8 million per year.If Malibu's cost of capital for the expansion is 5%,what will be the difference in the firm's share price compared to using the cash for a share repurchase?

The practice of maintaining relatively constant dividends is called:

Assume that you own 2500 shares of Omicron stock and that Omicron uses the entire $50 million to pay a special dividend.Suppose you are unhappy with Omicron's decision and would prefer that Omicron used the excess cash to repurchase shares.The number of shares that you would have to buy in order to undo the special cash dividend that Omicron paid is closest to:

When a firm has excessive cash,managers may make use of the funds in an inefficient manner.This is also referred to as the ________ cost of retaining cash.

Share repurchases have a tax advantage over dividends because: