Exam 14: Distributions to shareholders: dividends and repurchases

Brinkley Resources stock has increased significantly over the last five years, selling now for $175 per share.Management feels this price is too high for the average investor and wants to get the price down to a more typical level, which it thinks is $25 per share.What stock split would be required to get to this price, assuming the transaction has no effect on the total market value? Put another way, how many new shares should be given per one old share?

Stock dividends and stock splits should, at least conceptually, have the same effect on shareholders' wealth.

The following data apply to Garber Industries, Inc.(GII): The company plans on distributing $50 million as dividend payments.What will the intrinsic per share stock price be immediately after the distribution?

In recent years Constable Inc.has suffered losses, and its stock currently sells for only $0.50 per share.Management wants to use a reverse split to get the price up to a more "reasonable" level, which it thinks is $25 per share.How many of the old shares must be given up for one new share to achieve the $25 price, assuming this transaction has no effect on total market value?

If investors prefer firms that retain most of their earnings, then a firm that wants to maximize its stock price should set a low payout ratio.

Underlying the dividend irrelevance theory proposed by Miller and Modigliani is their argument that the value of the firm is determined only by its basic earning power and its business risk.

Downie Foods recently completed a 4-for-1 stock split.Prior to the split, its stock sold for $120 per share.If the firm's total market value increased by 5% as a result of increased liquidity caused by the split, what was the stock price following the split?

The Meltzer Corporation is contemplating a 7-for-3 stock split.The current stock price is $75.00 per share, and the firm believes that its total market value would increase by 5% as a result of the improved liquidity that it thinks would follow the split.What is the stock's expected price following the split?

The announcement of an increase in the cash dividend should, according to MM, lead to an increase in the price of the firm's stock.

Grandin Inc.is evaluating its dividend policy.It has a capital budget of $625, 000, and it wants to maintain a target capital structure of 60% debt and 40% equity.The company forecasts a net income of $475, 000.If it follows the residual dividend policy, what is its forecasted dividend payout ratio?

Which of the following statements is CORRECT?

Which of the following statements is correct?

If management wants to maximize its stock price, and if it believes that the dividend irrelevance theory is correct, then it must adhere to the residual distribution policy.

Which of the following statements is correct?

Which of the following statements is correct?

Which of the following statements is correct?

Rohter Galeano Inc.is considering how to set its dividend policy.It has a capital budget of $3, 000, 000.The company wants to maintain a target capital structure that is 15% debt and 85% equity.The company forecasts that its net income this year will be $3, 500, 000.If the company follows a residual dividend policy, what will be its total dividend payment?

David Rose Inc.forecasts a capital budget of $500, 000 next year with forecasted net income of $400, 000.The company wants to maintain a target capital structure of 30% debt and 70% equity.If the company follows the residual dividend policy, how much in dividends, if any, will it pay?

In the real world, dividends

Last week, Weschler Paint Corp.completed a 3-for-1 stock split.Immediately prior to the split, its stock sold for $150 per share.The firm's total market value was unchanged by the split.Other things held constant, what is the best estimate of the stock's post-split price?