Question 1

Assume an all-equity firm has positive net income.If this firm pays a cash dividend the:

Accepted Answer

A)  number of shares outstanding will increase.
B)  earnings per share will decrease.
C)  firm's total assets will remain constant.
D)  price-earnings ratio will decrease.
E)  firm's total equity will increaseF) None of the above
G) A) and B)

Question 2

Jessica currently owns 500 shares of Alpha stock valued at $19 share.What will her investment in Alpha be worth if the company declares a 4-for-3 stock split?

Accepted Answer

A)  $6,075
B)  $9,500
C)  $11,000
D)  $7,125
E)  $8,800F) C) and D)
G) D) and E)

Question 3

Most company managers overwhelming feel that:

Accepted Answer

A)  dividends should be increased annually no matter what.
B)  dividends should be flexible and adjusted annually in response to changes in the firm's earnings.
C)  the personal taxes of their shareholders must be their primary consideration when setting dividend policy.
D)  once a dividend is increased, it should not be decreased.
E)  dividend smoothing is talked about but rarely affects dividend decisions.F) B) and E)
G) B) and D)

Question 4

All of the following are means of reducing the number of outstanding shares with the exception of a(n) :

Accepted Answer

A)  open market purchase.
B)  reverse stock split.
C)  tender offer.
D)  rights offer.
E)  targeted repurchaseF) All of the above
G) B) and E)

Question 5

Pluto United has 14,200 shares of stock outstanding at a price per share of $23.How many shares will be outstanding if the firm does a 4-for-3 stock split?

Accepted Answer

A)  18,300 shares
B)  19,033 shares
C)  18,667 shares
D)  19,100 shares
E)  18,933 sharesF) C) and E)
G) A) and B)

Question 6

Cookies and Cream has 5,000 shares of stock outstanding at a market price of $8.29 per share.What will be the price per share after a stock dividend of 8 percent? Ignore taxes and market imperfections.

Accepted Answer

A)  $7.24
B)  $7.68
C)  $7.45
D)  $7.96
E)  $8.03F) C) and D)
G) A) and E)

Question 7

Normal cash dividends that are increased regularly tend to send which message?

Accepted Answer

A)  The firm is attempting to reduce its tax bill.
B)  The dividends are expected to increase the firm's agency costs.
C)  The firm is planning on downsizing.
D)  The firm is discontinuing all stock repurchases.
E)  The firm expects to be profitable.F) A) and B)
G) B) and E)

Question 8

The argument that dividend policy is irrelevant tends to be supported by which one of these factors?

Accepted Answer

A)  Flotation costs associated with equity issues
B)  Current tax laws
C)  An unsatisfied demand for high-dividend-paying stocks
D)  Current equilibrium in the clientele dividend market
E)  The current tax exclusion available to corporate investorsF) A) and B)
G) C) and E)

Question 9

Lexington Stables just declared a 15 percent stock dividend.Which one of the following increased by 15 percent as a result of this dividend?

Accepted Answer

A)  Book value of firm's equity
B)  Shareholders' wealth
C)  Number of shares outstanding
D)  Firm's cash balance
E)  Stock priceF) B) and E)
G) A) and B)

Question 10

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

Accepted Answer

A)  three business
B)  three
C)  two business
D)  two
E)  oneF) A) and B)
G) None of the above

Question 11

B& K Lumber has 50,600 shares of stock outstanding at a price per share of $68.How many shares will be outstanding if the firm does a 5-for-2stock split?

Accepted Answer

A)  20,240 shares
B)  22,300 shares
C)  55,667 shares
D)  126,500 shares
E)  121,120 sharesF) A) and E)
G) A) and D)

Question 12

Your portfolio is310 shares of Rising Sun Co.that currently sells for $48 a share.The company has announced a cash dividend of $1.04 per share with an ex-dividend date of tomorrow.Assume there are no taxes.What should you expect your portfolio value to be tomorrow morning assuming all else is held constant?

Accepted Answer

A)  $14,616
B)  $14,880
C)  $15,026
D)  $15,144
E)  $15,210F) C) and D)
G) B) and E)

Question 13

Which one of the following is least apt to limit the amount of cash dividends a firm can pay?

Accepted Answer

A)  Lack of retained earnings
B)  A bankruptcy proceeding
C)  A bond indenture covenant
D)  State laws
E)  Increasing stock priceF) All of the above
G) B) and C)

Question 14

In the US,stock dividends:

Accepted Answer

A)  tend to change in direct proportion to changes in earnings.
B)  have steadily declined in nominal terms over the years.
C)  tend to decrease in amount just as frequently as they increase.
D)  are concentrated in a few mature firms.
E)  have steadily declined in real terms over the years.F) C) and D)
G) None of the above

Question 15

This morning,Structural Steel purchased 3,500 of its outstanding shares in the open market.What type of transaction was this?

Accepted Answer

A)  Stock payout
B)  Stock distribution
C)  Stock dividend
D)  Stock repurchase
E)  Stock reversalF) C) and E)
G) A) and D)

Question 16

Dock Side Loaders has 12,500 shares of stock outstanding at a market price of $51 each and earnings per share of $2.24.The firm has decided to repurchase $62,475 worth of stock.What will the PE ratio be after the repurchase,all else held constant?

Accepted Answer

A)  21.08
B)  22.77
C)  19.03
D)  20.22
E)  20.54F) A) and D)
G) A) and E)

Question 17

The clientele effect states that investors fall into various groups because of differences in their preferences for which one of the following?

Accepted Answer

A)  Share price levels
B)  Risk level
C)  Short-term versus long-term investments
D)  Rates of return
E)  DividendsF) A) and B)
G) D) and E)

Question 18

JTL has 148,000 shares of stock outstanding.The firm has extra cash so it announced this morning that it is willing to repurchase 18,000 of its shares.What type of offer is the firm making?

Accepted Answer

A)  Rights offer
B)  Secondary issue
C)  Targeted repurchase
D)  Tender offer
E)  Private issueF) C) and E)
G) B) and C)

Question 19

Which one of the following reduces the number of shares outstanding but does not decrease the value of owners' equity?

Accepted Answer

A)  Stock repurchase
B)  Stock split
C)  Reverse stock split
D)  Cash distribution
E)  Liquidating dividendF) C) and D)
G) C) and E)

Question 20

Which one of the following is the date on which the board of directors agrees to pay a dividend and passes a resolution to do so?

Accepted Answer

A)  Date of record
B)  Ex-dividend date
C)  Payment date
D)  Declaration date
E)  Public announcement dateF) All of the above
G) B) and D)

Exam 14: Dividends and Dividend Policy

Dock Side Loaders has 12,500 shares of stock outstanding at a market price of $51 each and earnings per share of $2.24.The firm has decided to repurchase $62,475 worth of stock.What will the PE ratio be after the repurchase,all else held constant?

Correct Answer
verified

Normal cash dividends that are increased regularly tend to send which message?

Correct Answer
verified

Lexington Stables just declared a 15 percent stock dividend.Which one of the following increased by 15 percent as a result of this dividend?

Correct Answer
verified

Most company managers overwhelming feel that:

Correct Answer
verified

Which one of the following is the date on which the board of directors agrees to pay a dividend and passes a resolution to do so?

Correct Answer
verified

Which one of the following is least apt to limit the amount of cash dividends a firm can pay?

Correct Answer
verified

JTL has 148,000 shares of stock outstanding.The firm has extra cash so it announced this morning that it is willing to repurchase 18,000 of its shares.What type of offer is the firm making?

Correct Answer
verified

The argument that dividend policy is irrelevant tends to be supported by which one of these factors?

Correct Answer
verified

Jessica currently owns 500 shares of Alpha stock valued at $19 share.What will her investment in Alpha be worth if the company declares a 4-for-3 stock split?

Correct Answer
verified

In the US,stock dividends:

Correct Answer
verified

Assume an all-equity firm has positive net income.If this firm pays a cash dividend the:

Correct Answer
verified

This morning,Structural Steel purchased 3,500 of its outstanding shares in the open market.What type of transaction was this?

Correct Answer
verified

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

Correct Answer
verified

All of the following are means of reducing the number of outstanding shares with the exception of a(n) :

Correct Answer
verified

B& K Lumber has 50,600 shares of stock outstanding at a price per share of $68.How many shares will be outstanding if the firm does a 5-for-2stock split?

Correct Answer
verified

The clientele effect states that investors fall into various groups because of differences in their preferences for which one of the following?

Correct Answer
verified

Cookies and Cream has 5,000 shares of stock outstanding at a market price of $8.29 per share.What will be the price per share after a stock dividend of 8 percent? Ignore taxes and market imperfections.

Correct Answer
verified

Correct Answer
verified

Pluto United has 14,200 shares of stock outstanding at a price per share of $23.How many shares will be outstanding if the firm does a 4-for-3 stock split?

Correct Answer
verified

Which one of the following reduces the number of shares outstanding but does not decrease the value of owners' equity?

Correct Answer
verified

Exam 14: Dividends and Dividend Policy

Dock Side Loaders has 12,500 shares of stock outstanding at a market price of $51 each and earnings per share of $2.24.The firm has decided to repurchase $62,475 worth of stock.What will the PE ratio be after the repurchase,all else held constant?

Correct AnswerverifiedShow Answer

Normal cash dividends that are increased regularly tend to send which message?

Correct AnswerverifiedShow Answer

Lexington Stables just declared a 15 percent stock dividend.Which one of the following increased by 15 percent as a result of this dividend?

Correct AnswerverifiedShow Answer

Most company managers overwhelming feel that:

Correct AnswerverifiedShow Answer

Which one of the following is the date on which the board of directors agrees to pay a dividend and passes a resolution to do so?

Correct AnswerverifiedShow Answer

Which one of the following is least apt to limit the amount of cash dividends a firm can pay?

Correct AnswerverifiedShow Answer

JTL has 148,000 shares of stock outstanding.The firm has extra cash so it announced this morning that it is willing to repurchase 18,000 of its shares.What type of offer is the firm making?

Correct AnswerverifiedShow Answer

The argument that dividend policy is irrelevant tends to be supported by which one of these factors?

Correct AnswerverifiedShow Answer

Jessica currently owns 500 shares of Alpha stock valued at $19 share.What will her investment in Alpha be worth if the company declares a 4-for-3 stock split?

Correct AnswerverifiedShow Answer

In the US,stock dividends:

Correct AnswerverifiedShow Answer

Assume an all-equity firm has positive net income.If this firm pays a cash dividend the:

Correct AnswerverifiedShow Answer

This morning,Structural Steel purchased 3,500 of its outstanding shares in the open market.What type of transaction was this?

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

All of the following are means of reducing the number of outstanding shares with the exception of a(n) :

Correct AnswerverifiedShow Answer

B& K Lumber has 50,600 shares of stock outstanding at a price per share of $68.How many shares will be outstanding if the firm does a 5-for-2stock split?

Correct AnswerverifiedShow Answer

The clientele effect states that investors fall into various groups because of differences in their preferences for which one of the following?

Correct AnswerverifiedShow Answer

Cookies and Cream has 5,000 shares of stock outstanding at a market price of $8.29 per share.What will be the price per share after a stock dividend of 8 percent? Ignore taxes and market imperfections.

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Pluto United has 14,200 shares of stock outstanding at a price per share of $23.How many shares will be outstanding if the firm does a 4-for-3 stock split?

Correct AnswerverifiedShow Answer

Which one of the following reduces the number of shares outstanding but does not decrease the value of owners' equity?

Correct AnswerverifiedShow Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified