Exam 16: Dividend Policy

The final approval of a dividend payment comes from the

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

Share repurchases convey information to investors that the shares are underpriced.

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

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 might cause dividend policy to affect shareholder wealth?

Which of the following policies would appeal to an investor using dividends to increase her retirement income?

We typically expect to find rapidly growing firms to have high payout ratios.

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

Empirical evidence is conclusive that dividend policy matters.

The timing of dividend payments will not matter if the firm's rate of return on equity and the investor's required rate of return are the same.

Chandler Corporation has 1 million shares outstanding. The current price per share is $20. If the company decides to use $2 million dollars to repurchase shares at the market price, the company will have ________ shares outstanding worth approximately ________. Assume that the price does not change during the repurchase period.

Which of the following statements is most plausible?

After the stock split, the number of shares outstanding, their par value and the total common stock account will stand at

Immediately after the stock split, an investor who owned 100 share before the split will own

If investor's expect a 15% rate of return on their investment, they will be indifferent between a $1.00 dividend received immediately or

Which of the following motivates corporations to split their common stock?

Which of the following motivates corporations to enter into stock repurchase programs?

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

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?