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Exam 14: Dividends and Dividend Policy

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Question 1

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

A) open market purchase.
B) reverse stock split.
C) tender offer.
D) rights offer.
E) targeted repurchase.

F) A) and E)
G) A) and B)

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Question 2

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Research conducted on firms' dividend policies over time support which one of the following conclusions?

A) Aggregate dividends and stock repurchases have steadily declined in real terms.
B) Dividends are required to be paid by all public corporations in existence for ten years or more.
C) Managers tend to smooth dividends.
D) Stock prices react quickly whenever an anticipated dividend amount is paid.
E) Firms generally commence paying dividends prior to doing any stock repurchases.

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

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Question 3

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Which one of the following dates is the date on which the board of directors votes to pay a dividend?

Flemington Farms is evaluating an extra dividend versus a share repurchase.In either case, $10,000 would be spent.Current earnings are $2.10 per share, and the stock currently sells for $52 per share.There are 2,000 shares outstanding.Ignore taxes and other imperfections.The PE ratio will be ____ if the firm issues the dividend as compared to ____ if the firm does the share repurchase.

Kelsey International declared a dividend on Friday, November 13, that is payable on Friday, December 11, to holders of record on Monday, November 30.What is the latest date that you can purchase this stock if you wish to receive this dividend? Assume there are no banking holidays within this period of time.

A share repurchase will:

On which one of the following dates is the determination made as to which shareholders will receive a dividend payment?

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

Bob's Standard Station has 15,000 shares of stock outstanding at a market price of $15 a share.The current earnings per share are $1.26.The firm has total assets of $312,000 and total liabilities of $97,500.Next week, the firm will be repurchasing $37,500 worth of stock.Ignore taxes.What will be the earnings per share after the stock repurchase?

Which one of the following is an example of a liquidating dividend?

Of the following, which two are the best reasons for doing a reverse stock split? I.Return a stock to its normal trading range II.Eliminate small shareholders III.Reduce shareholder costs IV.Avoid delisting

Overboard Excursions just announced it will be paying an annual dividend of $1.37 a share plus an extra dividend of $.56 a share this year.The company also announced that its regular dividend, which is all it anticipates paying after this year, will increase by 1.5 percent annually.What is the anticipated dividend per share next year?

A stock repurchase will:

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?

Taylor's stock has plummeted in value and is currently priced at $5 a share.The firm prefers the price exceed $10 a share and thus has decided to do a reverse stock split.However, when it does this, the firm wants the stock price increased to at least twice its preferred minimum as it is concerned the price will fall further.Which one of the following stock split ratios is most appropriate for this situation?

M&N stock is currently selling for $22 per share.The firm just made an offer to one of its major shareholders to repurchase all the shares owned by that shareholder for $26 per share.What type of offer is being made?

Breakers Engineering is preparing to pay its quarterly dividend of $1.36 a share.The stock closed at $51.25 a share today and goes ex-dividend tomorrow.What will the ex-dividend stock price be if the relevant tax rate is 21 percent and all else is held constant?

The Meat Market has 16,000 shares of stock outstanding at a price per share of $7.What will be the price per share if the firm declares a 3-for-7 reverse stock split?

Baby Fresh Diaper Service has 30,000 shares of stock outstanding at a market price of $37.50 each and earnings per share of $1.22.The firm has decided to repurchase $187,500 worth of stock.What will the PE ratio be after the repurchase, all else held constant?

The Down Towner has a market value balance sheet as shown below.The firm currently has 12,000 shares of stock outstanding and net income of $17,500. The firm has decided to repurchase 10 percent of its outstanding stock at the current market price and fund that purchase with new debt.After the repurchase there will be ____ shares outstanding at a price per share of ____.