Question 1

Jean's Warehouse has 16,000 shares of stock outstanding. The current market value of the firm is $768,000. The company has retained earnings of $123,000, paid in surplus of $321,000, and a common stock account value of 16,000. The company is planning a 5-for-3 stock split. What will the retained earnings account value be after the split?

Accepted Answer

A)  $73,800
B)  $123,000
C)  $153,600
D)  $205,000
E)  $245,500F) C) and D)
G) B) and C)

Question 2

The fact that flotation costs can be significant is an argument for:
The fact that flotation costs can be significant is an argument for:

Accepted Answer

A)   a firm to issue larger dividends than its closest competitors.
B)   a firm to maintain a constant dividend policy even if it frequently has to issue new
C)   shares.
D)   maintaining a constant dividend policy even when profits decline significantly.
E)   maintaining a high dividend policy.F)  maintaining a low dividend policy and rarely issuing extra dividends.G) D) and E)
H) C) and F)

Question 3

Which of the following account balance changes occur as a result of a large stock dividend?
I. increase in common stock
II. decrease in capital in excess of par
III. increase in capital in excess of par
IV. decrease in retained earnings

Accepted Answer

A)  I and III only
B)  II and IV only
C)  I and IV only
D)  II and III only
E)  I, III, and IV onlyF) A) and E)
G) A) and D)

Question 4

Cooper Brands, Inc., has 68,000 shares of stock outstanding at a market price of $63 a share. The par value is $1 per share. The company has just announced a 5-for-4 stock split. What will the market price per share be after the split?

Accepted Answer

A)  $50.40
B)  $58.20
C)  $62.50
D)  $78.75
E)  $82.50F) B) and C)
G) C) and E)

Question 5

All else equal, the market value of a stock will tend to decrease by roughly the aftertax value of the dividend on the:

Accepted Answer

A)  dividend declaration date.
B)  ex-dividend date.
C)  date of record.
D)  date of payment.
E)  day after the date of payment.F) A) and B)
G) A) and C)

Question 6

Randall's, Inc. has 20,000 shares of stock outstanding with a par value of $1.00 per share. The market value is $12 per share. The balance sheet shows $42,000 in the capital in excess of par account, $20,000 in the common stock account, and $50,500 in the retained earnings account. The firm just announced a 5 percent (small)  stock dividend. What will the balance in the retained earnings account be after the dividend?

Accepted Answer

A)  $38,500
B)  $39,500
C)  $50,500
D)  $61,500
E)  $62,500F) C) and D)
G) All of the above

Question 7

S.L. Moffatt, Inc. has paid a quarterly dividend of $1.20 per share for the last ten quarters. Which one of the following is most apt to cause the firm to reduce the amount of its next dividend payment?

Accepted Answer

A)  decrease in the next quarter's revenue
B)  decrease in the next quarter's net income
C)  loss of a major customer which lowers the firm's outlook for the next few years
D)  major lump sum cash outflow next month to settle a class action product liability lawsuit on a product that is no longer produced
E)  decrease in the number of new projects under consideration as compared to last yearF) A) and B)
G) C) and D)

Question 8

A stock split:

Accepted Answer

A)  increases the total value of the common stock account.
B)  decreases the value of the retained earnings account.
C)  increases the par value per share.
D)  increases the value of the capital in excess of par account.
E)  decreases the market value per share.F) B) and D)
G) B) and C)

Question 9

Which one of the following statements appears to be supported by the current dividend policies of U.S. industrial firms?

Accepted Answer

A)  Firms tend to increase the dividend amount per share, even when it's unclear if the increase can be maintained.
B)  Investors no longer react to changes, either up or down, in dividends.
C)  Newer, high-growth firms tend to pay larger dividends than mature firms.
D)  Dividends are still viewed by shareholders as a signal of a firm's future outlook.
E)  Managers are no longer hesitant to lower dividend payments.F) C) and D)
G) C) and E)

Question 10

Verbal Communications, Inc., has 14,000 shares of stock outstanding with a par value of $1 per share and a market value of $46 per share. The firm just announced a 100 percent stock dividend. What is the market value per share after the dividend?

Accepted Answer

A)  $23.00
B)  $34.50
C)  $46.00
D)  $69.00
E)  $92.00F) A) and E)
G) B) and C)

Question 11

Billingsley United declared a $0.20 a share dividend on Thursday, October 16. The dividend will be paid on Monday, November 10 to shareholders of record on Friday, October 31. Which one of the following is the ex-dividend date?

Accepted Answer

A)  Tuesday, October 28
B)  Wednesday, October 29
C)  Thursday, October 30
D)  Wednesday, November 5
E)  Thursday, November 6F) A) and B)
G) D) and E)

Question 12

Prezario's has 25,000 shares of stock outstanding with a par value of $1 per share. The current market value of the firm is $847,000. Currently, the retained earnings account balance is $428,000 and the capital in excess of par value account balance is $187,000. The company just announced a 3-for-1 stock split. What is the common stock account balance after the stock split?

Accepted Answer

A)  $8,333
B)  $25,000
C)  $75,000
D)  $77,333
E)  $232,000F) B) and D)
G) None of the above

Question 13

The equity of Blooming Roses has a total market value of $16,000. Currently, the firm has excess cash of $1,200 and net income of $15,400. There are 750 shares of stock outstanding. What will be the percentage change in the stock price per share if the firm pays out all of its excess cash as a cash dividend?

Accepted Answer

A)  -9.40 percent
B)  -7.50 percent
C)  -5.80 percent
D)  -2.75 percent
E)  0.00 percentF) B) and C)
G) None of the above

Question 14

Taylor's Tools declared a $0.48 a share dividend on Friday, March 7. The dividend will be paid on Monday, April 7. The ex-dividend date is Tuesday, March 18. What is the record date?

Accepted Answer

A)  Friday, March 14
B)  Monday, March 17
C)  Wednesday, March 19
D)  Thursday, March 20
E)  Friday, March 21F) C) and D)
G) A) and B)

Question 15

Which one of the following statements related to dividend policy is correct?

Accepted Answer

A)  The primary question related to dividend policy is whether or not a firm should ever pay a dividend.
B)  Both dividends and dividend policy are irrelevant.
C)  Dividend policy focuses on the timing of dividend payments.
D)  Homemade dividends increase the importance of a firm's dividend policy decisions.
E)  Whether or not a firm ever pays a dividend is irrelevant to equity valuation.F) B) and C)
G) D) and E)

Question 16

Kurt's Market has 8,000 shares of stock outstanding with a par value of $1 per share and a market value of $13 per share. The balance sheet shows $8,000 in the common stock account, $26,000 in the capital in excess of par account, and $32,700 in the retained earnings account. The firm just announced a 100 percent stock dividend. What will be the balance in the retained earnings account after this dividend?

Accepted Answer

A)  $0
B)  $24,700
C)  $32,700
D)  $40,700
E)  $128,700F) C) and D)
G) A) and E)

Question 17

The information content of a dividend increase generally signals that:

Accepted Answer

A)  the firm has a one-time surplus of cash.
B)  the firm has few, if any, net present value projects to pursue.
C)  management believes earnings growth will be strong going forward.
D)  the firm has more cash than it needs due to a decline in future orders.
E)  dividends thereafter will be lower.F) D) and E)
G) B) and D)

Question 18

The balance sheet for Apple Pie Corp. is shown here in market value terms. There are 5,000 shares of stock outstanding.  The company has announced that it is going to repurchase $4,350 worth of stock. What will the price of the stock be after this repurchase?

Accepted Answer

A)  $35.00
B)  $36.19
C)  $39.21
D)  $42.50
E)  $43.33F) D) and E)
G) A) and B)

Question 19

Mario's has 18,000 shares of stock outstanding with a par value of $1 per share and a market price of $4 a share. The balance sheet shows $18,000 in the common stock account, $336,000 in the paid in surplus account, and $64,000 in the retained earnings account. The firm just announced a 5-for-1 stock split. What will the paid in surplus account value be after the split?

Accepted Answer

A)  $66,000
B)  $336,000
C)  $426,000
D)  $548,000
E)  $606,000F) B) and E)
G) B) and D)

Question 20

Which one of the following statements related to stock repurchases is correct?

Accepted Answer

A)  U.S.industrial firms have increased their stock repurchases every year for each of the past twenty years.
B)  A stock repurchase can be used as a means for incumbent officers to retain control of a firm.
C)  A tender offer indicates that a firm is willing and able to purchase how ever many shares the current shareholders wish to sell.
D)  All stock repurchases must be identified as such to the selling party.
E)  Stock repurchases can be a relatively tax-efficient method of distributing cash to shareholders.F) A) and E)
G) C) and D)

Exam 17: Dividends and Dividend Policy

The information content of a dividend increase generally signals that:

Correct Answer
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Which of the following account balance changes occur as a result of a large stock dividend? I. increase in common stock II. decrease in capital in excess of par III. increase in capital in excess of par IV. decrease in retained earnings

Correct Answer
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Taylor's Tools declared a $0.48 a share dividend on Friday, March 7. The dividend will be paid on Monday, April 7. The ex-dividend date is Tuesday, March 18. What is the record date?

Correct Answer
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A stock split:

Correct Answer
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Correct Answer
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Billingsley United declared a $0.20 a share dividend on Thursday, October 16. The dividend will be paid on Monday, November 10 to shareholders of record on Friday, October 31. Which one of the following is the ex-dividend date?

Correct Answer
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Which one of the following statements related to stock repurchases is correct?

Correct Answer
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Correct Answer
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Verbal Communications, Inc., has 14,000 shares of stock outstanding with a par value of $1 per share and a market value of $46 per share. The firm just announced a 100 percent stock dividend. What is the market value per share after the dividend?

Correct Answer
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Correct Answer
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Correct Answer
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Cooper Brands, Inc., has 68,000 shares of stock outstanding at a market price of $63 a share. The par value is $1 per share. The company has just announced a 5-for-4 stock split. What will the market price per share be after the split?

Correct Answer
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Correct Answer
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The fact that flotation costs can be significant is an argument for: The fact that flotation costs can be significant is an argument for:

Correct Answer
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All else equal, the market value of a stock will tend to decrease by roughly the aftertax value of the dividend on the:

Correct Answer
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Which one of the following statements appears to be supported by the current dividend policies of U.S. industrial firms?

Correct Answer
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S.L. Moffatt, Inc. has paid a quarterly dividend of $1.20 per share for the last ten quarters. Which one of the following is most apt to cause the firm to reduce the amount of its next dividend payment?

Correct Answer
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The balance sheet for Apple Pie Corp. is shown here in market value terms. There are 5,000 shares of stock outstanding. The company has announced that it is going to repurchase $4,350 worth of stock. What will the price of the stock be after this repurchase?

Correct Answer
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Which one of the following statements related to dividend policy is correct?

Correct Answer
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Exam 17: Dividends and Dividend Policy

The information content of a dividend increase generally signals that:

Correct AnswerverifiedShow Answer

Which of the following account balance changes occur as a result of a large stock dividend? I. increase in common stock II. decrease in capital in excess of par III. increase in capital in excess of par IV. decrease in retained earnings

Correct AnswerverifiedShow Answer

Taylor's Tools declared a $0.48 a share dividend on Friday, March 7. The dividend will be paid on Monday, April 7. The ex-dividend date is Tuesday, March 18. What is the record date?

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A stock split:

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Correct AnswerverifiedShow Answer

Billingsley United declared a $0.20 a share dividend on Thursday, October 16. The dividend will be paid on Monday, November 10 to shareholders of record on Friday, October 31. Which one of the following is the ex-dividend date?

Correct AnswerverifiedShow Answer

Which one of the following statements related to stock repurchases is correct?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Verbal Communications, Inc., has 14,000 shares of stock outstanding with a par value of $1 per share and a market value of $46 per share. The firm just announced a 100 percent stock dividend. What is the market value per share after the dividend?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Cooper Brands, Inc., has 68,000 shares of stock outstanding at a market price of $63 a share. The par value is $1 per share. The company has just announced a 5-for-4 stock split. What will the market price per share be after the split?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

The fact that flotation costs can be significant is an argument for: The fact that flotation costs can be significant is an argument for:

Correct AnswerverifiedShow Answer

All else equal, the market value of a stock will tend to decrease by roughly the aftertax value of the dividend on the:

Correct AnswerverifiedShow Answer

Which one of the following statements appears to be supported by the current dividend policies of U.S. industrial firms?

Correct AnswerverifiedShow Answer

S.L. Moffatt, Inc. has paid a quarterly dividend of $1.20 per share for the last ten quarters. Which one of the following is most apt to cause the firm to reduce the amount of its next dividend payment?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

The balance sheet for Apple Pie Corp. is shown here in market value terms. There are 5,000 shares of stock outstanding. The company has announced that it is going to repurchase $4,350 worth of stock. What will the price of the stock be after this repurchase?

Correct AnswerverifiedShow Answer

Which one of the following statements related to dividend policy is correct?

Correct AnswerverifiedShow Answer

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