Exam 16: Dividend Policy

Georges Bizet owns 10,000 shares of Pearl Co.purchased at an average price of $15 per share.The tax rate on both dividends and capital gains is 15%.Would Bizet prefer a $2.00 per share dividend or to sell 1,000 shares back to the company at $20 per share? Compute his after-tax income from each option.

Which of the following is the most probable way in which a shareholder will benefit from a stock split?

Noblesville Auto Supply Company's stock is trading ex-dividend at $5 per share.The company just paid a 10% stock dividend.The P/E ratio for the stock is 10.What was the price of the stock prior to trading ex-dividend?

Dividend payout ratios are generally much lower for small or newly established firms than for large,publicly owned firms.

The only definite result from a stock dividend or a stock split is

The dividend policy that states smoothing of the dividend stream in order to minimize the effect of company reversals is called the

For a company with unpredictable investment needs and opportunities,the best way to distribute cash to shareholders would be

Use the following information to answer the following question(s). Your firm is planning a 2 for 1 stock split.The market price for the stock has been $84.The table below presents the equity portion of your firm's balance sheet before the split. Common stock Par value (1 million shares outstanding;$4 par value)$ 4,000,000 Paid-in capital 16,000,000 Retained earnings 30,000,000 Total equity $50,000,000 -Immediately after the stock split,an investor who owned 100 share before the split will own

Since 2003 for most investors the tax rate on dividends has been ________ and the tax rate on capital gains has been ________.

A firm that maintains stable cash dividends will generally not increase the dividend unless

Five years ago,Mr.Martinez purchased 1000 shares of JPM stock at $50 per share.The market price of the stock is now $55.If Mr.Martinez ' tax rate is 25%,would he prefer that the company pay a $5.00 per share dividend or offer to repurchase 100 shares at the market price? Assume that after the ex-dividend date,the price would return to $50 per share.

Firms can use stock repurchases as a dividend substitute.

Assume that Home Depot's annual dividend is $1.60 per share.This dividend would most likely be paid as

Although the rates have changed from time to time,dividends and capital gains have always been taxed at the same rate in the U.S.

Which of the following dividend policies would cause dividends per share to fluctuate the most?

Which of the following statements about the residual dividend theory is FALSE?

In 2013,Apple Computers decided to raise a large amount of money by selling bonds (previously the company had little or no debt)and use the proceeds to repurchase billions of dollars worth of the company's stock.The decision was made after Apple stock lost more than 40% of its value in a six month period when most stock prices were rising.What were the company's intentions?

The final approval of a dividend payment comes from the

Empirical evidence is conclusive that dividend policy matters.

Groups of investors who prefer one distribution method over another are known as