Question 1

The last date on which you can purchase shares of stock and still receive the dividend is the date which is _____ business days prior to the date of record.

Accepted Answer

A)  1
B)  2
C)  3
D)  4
E)  5F) B) and C)
G) A) and C)

Question 2

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

Question 3

The ex-dividend date is defined as _____ business day(s)  before the date of record.

Accepted Answer

A)  1
B)  2
C)  3
D)  5
E)  10F) None of the above
G) A) and C)

Question 4

Southern Fried Chicken has 8,000 shares of stock outstanding with a par value of $1 per share and a market value of $34 per share.The balance sheet shows $45,000 in the capital in excess of par account, $8,000 in the common stock account, and $152,000 in the retained earnings account.The firm just announced a 5 percent stock dividend.What will total owners' equity be after the dividend?

Accepted Answer

A)  $185,800
B)  $199,000
C)  $205,000
D)  $206,800
E)  $212,200F) A) and B)
G) B) and D)

Question 5

If you ignore taxes and costs, a stock repurchase will:
I.reduce the total assets of a firm.
II.decrease the earnings per share.
III.reduce the PE ratio more so than an equivalent stock dividend.
IV.reduce the total equity of a firm.

Accepted Answer

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

Question 6

An investor is more likely to prefer a high dividend payout if a firm:

Accepted Answer

A)  has high flotation costs.
B)  has few, if any, positive net present value projects.
C)  has lower tax rates than the investor.
D)  has a stock price that is increasing rapidly.
E)  offers substantial gains on its equities, which are taxed at a favorable rate.F) A) and D)
G) B) and E)

Question 7

Josh's, Inc.has 7,000 shares of stock outstanding with a par value of $1.00 per share and a market value of $32 a share.The balance sheet shows $82,000 in the capital in excess of par account, $7,000 in the common stock account, and $64,800 in the retained earnings account.The firm just announced a 10 percent stock dividend.What is the value of the capital in excess of par account after the dividend?

Accepted Answer

A)  $76,000
B)  $82,000
C)  $97,700
D)  $103,700
E)  $104,400F) D) and E)
G) B) and E)

Question 8

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

Question 9

Western Mountain Water has 11,000 shares of stock outstanding with a par value of $1 per share.The current market value of the firm is $135,000.The balance sheet shows a capital in excess of par value account balance of $68,000 and retained earnings of $49,000.The company just announced a 2-for-1 stock split.What will the capital in excess of par value account balance be after the split?

Accepted Answer

A)  $45,333
B)  $54,667
C)  $68,000
D)  $86,667
E)  $102,000F) A) and B)
G) A) and C)

Question 10

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) C) and E)
G) A) and C)

Question 11

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

Question 12

Verbal Communications, Inc., has 14,000 shares of stock outstanding with a par value of $1 per share and a market value of $32 per share.The firm just announced a 100 percent stock dividend.What is the market value per share after the dividend?

Accepted Answer

A)  $16.00
B)  $23.00
C)  $32.00
D)  $46.00
E)  $64.00F) A) and D)
G) A) and C)

Question 13

A $0.60 quarterly cash payment paid by T.L.Jones & Co.to its shareholders in the normal course of business is called a:

Accepted Answer

A)  repurchase.
B)  liquidating dividend.
C)  regular cash dividend.
D)  special dividend.
E)  extra cash dividend.F) C) and D)
G) A) and C)

Question 14

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 C)
G) A) and B)

Question 15

Lester's Frozen Foods just paid out $0.50 a share to its shareholders.The cash for these payments came from a large sale of assets, not from any earnings of the firm.What are these payments to shareholders called?

Accepted Answer

A)  dividends
B)  distributions
C)  repurchases
D)  payments-in-kind
E)  stock splitsF) C) and D)
G) B) and C)

Question 16

Which two of the following are the best justifications for a reverse stock split?
I.combine a reverse stock split with a stock repurchase to enable a firm to go dark
II.increase the respectability of the stock
III.avoid delisting
IV.reduce transaction costs for shareholders

Accepted Answer

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

Question 17

Which one of the following is a result of a stock repurchase?

Accepted Answer

A)  increase in the number of shares outstanding
B)  increase in the market price per share
C)  increase in the total equity of the repurchasing firm
D)  decrease in EPS
E)  PE ratio equal to that resulting from a comparable cash dividendF) A) and B)
G) A) and C)

Question 18

Green Roof Motels has more cash on hand than its operations require.Thus, the firm has decided to pay out some of its earnings in the form of cash to its shareholders.What are these payments to shareholders called?

Accepted Answer

A)  dividends
B)  stock payments
C)  repurchases
D)  payments-in-kind
E)  stock splitsF) B) and C)
G) C) and D)

Question 19

Stock splits can be used to:

Accepted Answer

A)  adjust the market price of a stock such that it falls within a preferred trading range.
B)  decrease the excess cash held by a firm thereby lowering agency costs.
C)  increase both the number of shares outstanding and the market price per share.
D)  increase the total equity of a firm.
E)  adjust the debt-equity ratio.F) C) and E)
G) All of the above

Question 20

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

Exam 17: Short-Term Financial Planning and Management

A $0.60 quarterly cash payment paid by T.L.Jones & Co.to its shareholders in the normal course of business is called a:

Correct Answer
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Which one of the following is a result of a stock repurchase?

Correct Answer
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Correct Answer
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If you ignore taxes and costs, a stock repurchase will: I.reduce the total assets of a firm. II.decrease the earnings per share. III.reduce the PE ratio more so than an equivalent stock dividend. IV.reduce the total equity of a firm.

Correct Answer
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The last date on which you can purchase shares of stock and still receive the dividend is the date which is _____ business days prior to the date of record.

Correct Answer
verified

Green Roof Motels has more cash on hand than its operations require.Thus, the firm has decided to pay out some of its earnings in the form of cash to its shareholders.What are these payments to shareholders called?

Correct Answer
verified

Lester's Frozen Foods just paid out $0.50 a share to its shareholders.The cash for these payments came from a large sale of assets, not from any earnings of the firm.What are these payments to shareholders called?

Correct Answer
verified

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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Verbal Communications, Inc., has 14,000 shares of stock outstanding with a par value of $1 per share and a market value of $32 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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The ex-dividend date is defined as _____ business day(s) before the date of record.

Correct Answer
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Stock splits can be used to:

Correct Answer
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What is the information content effect?

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Which two of the following are the best justifications for a reverse stock split? I.combine a reverse stock split with a stock repurchase to enable a firm to go dark II.increase the respectability of the stock III.avoid delisting IV.reduce transaction costs for shareholders

Correct Answer
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An investor is more likely to prefer a high dividend payout if a firm:

Correct Answer
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A stock split:

Correct Answer
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Exam 17: Short-Term Financial Planning and Management

A $0.60 quarterly cash payment paid by T.L.Jones & Co.to its shareholders in the normal course of business is called a:

Correct AnswerverifiedShow Answer

Which one of the following is a result of a stock repurchase?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

If you ignore taxes and costs, a stock repurchase will: I.reduce the total assets of a firm. II.decrease the earnings per share. III.reduce the PE ratio more so than an equivalent stock dividend. IV.reduce the total equity of a firm.

Correct AnswerverifiedShow Answer

The last date on which you can purchase shares of stock and still receive the dividend is the date which is _____ business days prior to the date of record.

Correct AnswerverifiedShow Answer

Green Roof Motels has more cash on hand than its operations require.Thus, the firm has decided to pay out some of its earnings in the form of cash to its shareholders.What are these payments to shareholders called?

Correct AnswerverifiedShow Answer

Lester's Frozen Foods just paid out $0.50 a share to its shareholders.The cash for these payments came from a large sale of assets, not from any earnings of the firm.What are these payments to shareholders called?

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

Verbal Communications, Inc., has 14,000 shares of stock outstanding with a par value of $1 per share and a market value of $32 per share.The firm just announced a 100 percent stock dividend.What is the market value per share after the dividend?

Correct AnswerverifiedShow Answer

The ex-dividend date is defined as _____ business day(s) before the date of record.

Correct AnswerverifiedShow Answer

Stock splits can be used to:

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

What is the information content effect?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Which two of the following are the best justifications for a reverse stock split? I.combine a reverse stock split with a stock repurchase to enable a firm to go dark II.increase the respectability of the stock III.avoid delisting IV.reduce transaction costs for shareholders

Correct AnswerverifiedShow Answer

An investor is more likely to prefer a high dividend payout if a firm:

Correct AnswerverifiedShow Answer

A stock split:

Correct AnswerverifiedShow Answer

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