Question 1

Which one of the following refers to the ability of shareholders to undo a firm's dividend policy and create an alternative dividend policy by reinvesting dividends or selling shares of stock?

Accepted Answer

A)   perfect foresight model
B)   personalization
C)   recapitalization
D)   offsetting leverage
E)   homemade dividend policyF) A) and D)
G) A) and B)

Question 2

Steve owns 3,000 shares of NOP,Inc.stock,which he purchased six years ago at a price of $22 a share.Today,these shares are selling for $68 each.Assume the current tax laws are such that Steve is subject to a tax rate of 25 percent on both his dividend income and his capital gains.From Steve's point of view,a stock repurchase today: (Ignore costs)

Accepted Answer

A)   is equivalent to a cash dividend in all respects.
B)   is more desirable than a cash dividend in respect to taxes.
C)   will result in the same tax liability as an equivalent cash dividend.
D)   is more highly taxed than a cash dividend.
E)   is totally unacceptable to him.F) A) and D)
G) A) and C)

Question 3

Kate purchased 500 shares of Fast Deliveries stock on Wednesday,July 7th.Ted purchased 100 shares of Fast Deliveries stock on Thursday,July 8th.Fast Deliveries declared a dividend on June 20th to shareholders of record on July 12th and payable on August 1st.Which one of the following statements concerning the dividend paid on August 1st is correct given this information?

Accepted Answer

A)   Neither Kate nor Ted is entitled to the dividend.
B)   Kate is entitled to the dividend but Ted is not.
C)   Ted is entitled to the dividend but Kate is not.
D)   Both Ted and Kate are entitled to the dividend.
E)   Both Ted and Kate are entitled to one-half of the dividend amount.F) All of the above
G) A) and E)

Question 4

What is the information content effect?

Accepted Answer

A)   any type of new information that causes a firm to cease paying dividends
B)   any news announcement that was anticipated and thus produces no reaction from investors
C)   the primary contributing data that helps directors determine the amount of a particular dividend payment
D)   any type of reaction from a shareholder in response to a news announcement related to the stock issuer
E)   the financial market's reaction to a change in the amount of a firm's dividendF) A) and D)
G) A) and C)

Question 5

A stock repurchase program:

Accepted Answer

A)   requires all shareholders to sell a fraction of their shares.
B)   is preferred over a high-dividend program only by tax-exempt shareholders.
C)   decreases both the number of shares outstanding and the market price per share.
D)   has no effect on a firm's financial statements.
E)   is essentially the same as a cash dividend program provided there are no taxes or other costs.F) A) and D)
G) A) and C)

Question 6

Which of the following balance sheet accounts are affected by a small stock dividend?
I.cash
II.common stock
III.retained earnings
IV.capital in excess of par value

Accepted Answer

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

Question 7

The common stock of Gillen Entertainment is selling for $65 a share.The par value per share is $1.Currently,the firm has a total market value of $936,000.How many shares of stock will be outstanding if the firm does a 5-for-2 stock split?

Accepted Answer

A)   4,800 shares
B)   9,600 shares
C)   18,000 shares
D)   36,000 shares
E)   32,200 sharesF) All of the above
G) B) and E)

Question 8

Plyler Cabinets declared a dividend of $1.20 a share on May 15 to holders of record on Monday,June 1.The dividend is payable on June 15.Sara purchased 500 shares of Plyler Cabinets stock on Friday,May 29.How much dividend income will she receive on June 15 from Plyler Cabinets?

Accepted Answer

A)   $0
B)   $0.80
C)   $1.60
D)   $160.00
E)   $320.00F) C) and D)
G) D) and E)

Question 9

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) C) and D)
G) None of the above

Question 10

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) A) and D)

Question 11

You own 1,000 shares of stock in Avondale Corporation.You will receive an 80-cent per share dividend in one year.In two years,Avondale will pay a liquidating dividend of $40 per share.The required return on Avondale stock is 14 percent.What will your dividend income be this year if you use homemade dividends to create two equal annual dividend payments?

Accepted Answer

A)   $15,184
B)   $15,980
C)   $18,667
D)   $19,117
E)   $20,400F) B) and E)
G) A) and D)

Question 12

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) A) and B)
G) C) and D)

Question 13

Explain how cash dividends affect individual shareholders differently than an equal amount of funds spent on a repurchase.

Accepted Answer

Dividends are payable to all shareholder...

Question 14

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) All of the above
G) A) and B)

Question 15

Which of the following shareholders tend to favor a high dividend policy?
I.retired individuals
II.endowment funds
III.corporate investors
IV.investors with high dividend tax rates but low capital gains tax rates

Accepted Answer

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

Question 16

Automatic dividend reinvestment plans:
I.require that stockholders reinvest all of the dividends to which they are entitled.
II.sometimes grant shareholders the privilege of purchasing additional shares at a discounted price.
III.help shareholders create their own homemade dividend policies.
IV.help make corporate dividend policies irrelevant to individual stockholders.

Accepted Answer

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

Question 17

Which one of the following is a direct result of a 2-for-1 stock split?

Accepted Answer

A)   a 100 percent increase in the number of shareholders
B)   a 100 percent increase in the common stock account balance
C)   a 100 percent decrease in the stock price
D)   a 50 percent increase in the number of shares outstanding
E)   a 50 percent decrease in the par value per shareF) C) and D)
G) B) and C)

Question 18

Which of the following tend to keep dividends low?
I.shareholders desiring current income
II.terms contained in bond indenture agreements
III.the desire to maintain constant dividends over time
IV.flotation costs

Accepted Answer

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

Question 19

The Green Fiddle has declared a $5 per share dividend.Suppose capital gains are not taxed,but dividends are taxed at 15 percent.New IRS regulations require that taxes be withheld at the time the dividend is paid.Green Fiddle stock sells for $71.50 per share,and the stock is about to go ex-dividend.What will the ex-dividend price be?

Accepted Answer

A)   $67.25
B)   $67.90
C)   $78.30
D)   $79.50
E)   $82.23F) B) and D)
G) A) and C)

Question 20

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) D) and E)
G) A) and E)

Exam 17: Dividends and Payout Policypart Seven: Short-Term Financial Planning and Management

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

Correct Answer
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Explain how cash dividends affect individual shareholders differently than an equal amount of funds spent on a repurchase.

Correct Answer
verified
Dividends are payable to all shareholder...
View Answer

Which of the following balance sheet accounts are affected by a small stock dividend? I.cash II.common stock III.retained earnings IV.capital in excess of par value

Correct Answer
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Which one of the following is a direct result of a 2-for-1 stock split?

Correct Answer
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Correct Answer
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Correct Answer
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Plyler Cabinets declared a dividend of $1.20 a share on May 15 to holders of record on Monday,June 1.The dividend is payable on June 15.Sara purchased 500 shares of Plyler Cabinets stock on Friday,May 29.How much dividend income will she receive on June 15 from Plyler Cabinets?

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
verified

Correct Answer
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Which of the following shareholders tend to favor a high dividend policy? I.retired individuals II.endowment funds III.corporate investors IV.investors with high dividend tax rates but low capital gains tax rates

Correct Answer
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Correct Answer
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The common stock of Gillen Entertainment is selling for $65 a share.The par value per share is $1.Currently,the firm has a total market value of $936,000.How many shares of stock will be outstanding if the firm does a 5-for-2 stock split?

Correct Answer
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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
verified

Which one of the following refers to the ability of shareholders to undo a firm's dividend policy and create an alternative dividend policy by reinvesting dividends or selling shares of stock?

Correct Answer
verified

What is the information content effect?

Correct Answer
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Which of the following tend to keep dividends low? I.shareholders desiring current income II.terms contained in bond indenture agreements III.the desire to maintain constant dividends over time IV.flotation costs

Correct Answer
verified

A stock repurchase program:

Correct Answer
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A stock split:

Correct Answer
verified

Exam 17: Dividends and Payout Policypart Seven: Short-Term Financial Planning and Management

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

Correct AnswerverifiedShow Answer

Explain how cash dividends affect individual shareholders differently than an equal amount of funds spent on a repurchase.

Correct AnswerverifiedDividends are payable to all shareholder...View AnswerShow Answer

Which of the following balance sheet accounts are affected by a small stock dividend? I.cash II.common stock III.retained earnings IV.capital in excess of par value

Correct AnswerverifiedShow Answer

Which one of the following is a direct result of a 2-for-1 stock split?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Plyler Cabinets declared a dividend of $1.20 a share on May 15 to holders of record on Monday,June 1.The dividend is payable on June 15.Sara purchased 500 shares of Plyler Cabinets stock on Friday,May 29.How much dividend income will she receive on June 15 from Plyler Cabinets?

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

Correct AnswerverifiedShow Answer

Which of the following shareholders tend to favor a high dividend policy? I.retired individuals II.endowment funds III.corporate investors IV.investors with high dividend tax rates but low capital gains tax rates

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

The common stock of Gillen Entertainment is selling for $65 a share.The par value per share is $1.Currently,the firm has a total market value of $936,000.How many shares of stock will be outstanding if the firm does a 5-for-2 stock split?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

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 refers to the ability of shareholders to undo a firm's dividend policy and create an alternative dividend policy by reinvesting dividends or selling shares of stock?

Correct AnswerverifiedShow Answer

What is the information content effect?

Correct AnswerverifiedShow Answer

Which of the following tend to keep dividends low? I.shareholders desiring current income II.terms contained in bond indenture agreements III.the desire to maintain constant dividends over time IV.flotation costs

Correct AnswerverifiedShow Answer

A stock repurchase program:

Correct AnswerverifiedShow Answer

A stock split:

Correct AnswerverifiedShow Answer

Correct Answer
verified

Correct Answer
verified
Dividends are payable to all shareholder...
View Answer

Correct Answer
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