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Exam 14: Dividends and Dividend Policy

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Question 21

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Dorchester, Inc. has 7,500 shares of stock outstanding at a market price of $42 each and earnings per share of $1.80. The firm has decided to repurchase $63,000 worth of stock. What will the PE ratio be after the repurchase, all else held constant?

A) $1.30
B) $1.44
C) $1.80
D) $2.02
E) $2.25

F) All of the above
G) B) and E)

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Question 22

Multiple Choice

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Mueller Brothers has 38,000 shares of stock outstanding at a price per share of $59. How many shares will be outstanding if the firm does a 3-for-2 stock split?

A) 24,000 shares
B) 25,333 shares
C) 55,667 shares
D) 57,000 shares
E) 61,000 shares

F) All of the above
G) C) and D)

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Question 23

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Heidi owns 400 shares of Boyd Enterprises stock, which is valued at $17 a share. Boyd Enterprises just declared a 10 percent stock dividend. How many shares will Heidi own and what will the price per share be after the dividend?

Which one of the following is basically equivalent to a 2-for-1 stock split?

You are having a discussion with one of your classmates on dividend policy. Your classmate states that dividend policy is totally irrelevant. Write a response to this statement justifying that in the real-world dividend policy does matter.

This morning, Lambert Materials bought 10,000 of its outstanding shares in the open market. What type of transaction was this?

The common stock of Patee International goes ex-dividend tomorrow. The stock closed at a price of $33.60 a share today. This quarter, the company is paying a cash dividend of $0.24 a share and a liquidating dividend of $0.60 a share. Ignoring taxes and assuming that all else is held constant, what will the ex-dividend price be tomorrow morning?

Aaron's Nursery has 6,000 shares of stock outstanding at a market price of $20 a share. The earnings per share are $1.54. The firm has total assets of $315,000 and total liabilities of $186,000. Today, the firm is repurchasing $4,800 worth of stock. Ignore taxes. What will the earnings per share be after the stock repurchase?

Theodore's has common stock outstanding at a price of $26 a share. The total market value of the equity is $429,000. How many shares of stock will be outstanding if the firm does a 2-for-5 reverse stock split?

Which one of these statements is correct?

Kelso's is considering spending $80,000 on either a stock repurchase or an extra cash dividend. Which one of the following values will be the same whether the firm pays a dividend or repurchases stock? Assume there are no taxes or market imperfections.

Which one of the following reduces the number of shares outstanding but does not change a firm's total equity?

Taylor's, Inc. stock has plummeted in value and is currently priced at $4 a share. The exchange on which the stock trades requires that the minimum stock price be $10 a share. Taylor's has decided to do a reverse stock split to avoid delisting. However, when it does this, the firm wants the stock price increased to at least twice the minimum exchange required price. Which one of the following stock split ratios is most appropriate for this situation?

The owners' equity accounts for Speed Boats are shown here:

Which one of the following is a drawback of cash dividends?

As of 2003, the maximum tax rate on long-term capital gains for high-income individuals was which one of the following rates?

The owners' equity accounts for Boats and More are shown here: Assume Boats and More stock currently sells for $38 per share and a 10 percent stock dividend is declared. What will be the new common stock account value?

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

Your portfolio is 240 shares of Rising Sun Co. The stock currently sells for $62 a share. The company has announced a dividend of $1.10 per share with an ex-dividend date of May 6. Assume there are no taxes. What will your portfolio value be on May 7?

Chelsie Enterprises declared a dividend to shareholders of record on Monday, February 8, that is payable on Friday, February 26. Carla knows that her dividend check normally arrives three business days after the check is written. On which one of the following days should she expect to receive her dividend check?