Exam 16: Dividend Policy

Explain the significance of each of the following: a.announcement date b.ex-dividend date c.record date d.payment date

According to the residual theory of dividends

Which of the following statements is true?

Assume that as the result of a firm announcing a large unexpected increase in its dividend payment,the price of the firm's common stock rises.This event would be consistent with which of the following?

A stock repurchase increases the

Which of the following is a reason that a company would repurchase its own shares of stock in the market?

Which of the following might cause dividend policy to affect shareholder wealth?

You are considering the stock of two firms to add to your portfolio.The companies differ only with respect to their dividend policies.For both firms,investors expect EPS for each of the next two years to be $7 and dividends and ending price for each of the next two periods to be: D1 D2 P2 Firm A $2 $2 $60.70 Firm B 4 4 56.42 The required rate of return for the stock of Firm A is 14%.Ignore taxes or transaction fees. a.How much would investors pay for the stock of Firm A? b.How much would investors pay for the stock of Firm B? c.For a less-than-perfect world,provide an argument for each of the following: (1)Investors prefer the dividend policy of Firm A. (2)Investors prefer the dividend policy of Firm B. (3)Firms prefer the dividend policy of Firm A.

Which of the following would influence a firm's decision about dividends for large firms?

Managers avoid cutting dividends even in response to short-term fluctuations in earnings.

Pettry,Inc.expects EPS this year to be $5.25.If EPS grows at an average annual rate of 10%,and if Pettry pays 60% of its earnings as dividends,what will the expected dividend per share be in 10 years?

Brimfield Corp.has total cash available of $1 million,but decides to match last year's dividend payout of $1.5 million.If the company raises the extra $500,000 by selling stock,the decision to pay out more than its available cash in dividends should

The Modigliani and Miller dividend irrelevancy theorem states that

If a firm were to unexpectedly omit payment of its quarterly dividend,that firm's stock price would probably drop.

Trendy Corp.recently declared a 10% stock dividend.As of the date of the announcement,Trendy had 10 million shares outstanding which were selling on the NYSE for $50 per share.An accounting entry is required on the balance sheet in order to transfer an amount from retained earnings to the common stock and additional paid-in capital accounts.What is the dollar amount of retained earnings that will be transferred from retained earnings to the common stock account as the result of the stock dividend? Assume that the par value of Trendy is $2 per share.

As a firm's investment opportunities increase,the dividend payout ratio should increase.

European firms tend to pay out more dividends than U.S.firms.

Dividends per share divided by earnings per share (EPS)equals the dividend retention date.

A stock dividend will cause changes in the dollar value of which of the below capital accounts?

Unexpected dividend changes would cause investors to reassess their perceptions about a firm's stock.