Question 1

The equity section of a firm's market value balance sheet has common stock of $100,000 (par value $1) ; capital surplus of $125,450; and retained earnings of $427,500.The firm's stock sells for $36 a share.If the firm repurchases $55,000 of stock, what will be the new market value of the firm's total equity?

Accepted Answer

A)  $582,521
B)  $612,400
C)  $632,950
D)  $632,096
E)  $597,950F) C) and D)
G) A) and B)

Question 2

Tuesday, December 1, is the ex-dividend date for Alpha stock.Which one of the following dates is the record date? Assume there are no banking holidays to consider.

Accepted Answer

A)  Friday, November 27
B)  Monday, November 30
C)  Wednesday, December 2
D)  Thursday, December 3
E)  Friday, December 4F) None of the above
G) B) and C)

Question 3

The equity section of a firm's market value balance sheet has common stock of $250,000 (par value $1) ; capital surplus of $145,650; and retained earnings of $624,250.The firm's stock sells for $27 a share.If the firm repurchases $75,000 of stock, what will be the new market value of the firm's total equity?

Accepted Answer

A)  $949,471
B)  $979,350
C)  $999,900
D)  $999,046
E)  $945,900F) C) and D)
G) A) and D)

Question 4

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

Accepted Answer

A)  20 percent stock dividend
B)  25 percent stock dividend
C)  50 percent stock dividend
D)  100 percent stock dividend
E)  200 percent stock dividendF) A) and B)
G) B) and E)

Question 5

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 increase.F) D) and E)
G) B) and D)

Question 6

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

Accepted Answer

A)  Firms may have to obtain additional external financing which would not be required in the absence of the dividends.
B)  Stock prices tend to increase as annual dividend amounts increase.
C)  Cash dividends support stock prices.
D)  Dividends tend to lower agency costs.
E)  Dividend-paying firms tend to attract a wider field of investors than do non-dividend-paying firms.F) D) and E)
G) A) and D)

Question 7

During the past year, ABC stock has sold for as little as $19 a share and a much as $33 a share.Which one of the following terms applies to these prices?

Accepted Answer

A)  Benchmark values
B)  Price splits
C)  Price dividers
D)  Split range
E)  Trading rangeF) B) and C)
G) B) and E)

Question 8

Oak Tree Farms has common stock outstanding at a price of $13 a share.The total market value of the equity is $435,000.How many shares of stock will be outstanding if the firm does a reverse stock split of 2-for-5?

Accepted Answer

A)  9,602 shares
B)  36,000 shares
C)  13,385 shares
D)  37,500 shares
E)  83,654 sharesF) B) and D)
G) All of the above

Question 9

Innovative Technologies has 46,000 shares of stock outstanding at a market price of $6 a share.Which one of the following stock splits should the firm declare if it wants to increase the stock price to exactly $16 a share? Ignore any taxes or market imperfections.

Accepted Answer

A)  5-for-2 stock split
B)  3-for-1 stock split
C)  1-for-3-reverse stock split
D)  2-for-5 reverse stock split
E)  3-for-8 reverse stock splitF) A) and B)
G) A) and C)

Question 10

Assume there are no taxes or imperfections.Given this assumption, which one of the following statements is correct?

Accepted Answer

A)  A cash dividend has no effect on the market price of the payer's stock.
B)  A cash dividend decreases shareholder wealth.
C)  Stock repurchases decrease the market value per share.
D)  Both a cash dividend and a share repurchase increase a firm's PE ratio.
E)  A stock repurchase has the same effect on a firm's market value balance sheet as does a cash dividend.F) A) and E)
G) A) and D)

Question 11

Your portfolio is 500 shares of Country Marine Parts that currently sells for $33 a share.The company has announced a cash dividend of $0.75 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)  $16,236
B)  $16,500
C)  $16,646
D)  $16,764
E)  $16,830F) B) and D)
G) A) and E)

Question 12

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

Question 13

Which one of these favors a high-dividend payout?

Accepted Answer

A)  Low transaction costs on stock trades
B)  Lower taxes on capital gains than on dividends
C)  Tax deferment on capital gains, but not on dividend income
D)  Flotation costs
E)  Corporate shareholdersF) None of the above
G) A) and C)

Question 14

Which one of the following events must occur before a firm can offer a liquidating dividend?

Accepted Answer

A)  Bankruptcy filing
B)  Insolvency declaration
C)  Asset sale
D)  Negative equity
E)  Failed bond issueF) None of the above
G) A) and E)

Question 15

Assume that satisfied clienteles exist.Given this assumption, which one of these statements is correct?

Accepted Answer

A)  A firm can increase its share price by increasing its dividend payout.
B)  Dividend policy is irrelevant as long as each clientele group remains satisfied.
C)  All firms will adopt a high-dividend-payout policy.
D)  All dividends become irrelevant.
E)  All firms should adopt a low-dividend-payout policy.F) A) and B)
G) A) and C)

Question 16

Which statement is correct?

Accepted Answer

A)  Stock dividends tend to reduce agency costs related to shareholders but stock repurchases do not.
B)  It is relatively easy to determine whether or not a firm has completed a planned stock repurchase.
C)  Fixed stock repurchases allow managers to repurchase shares only when they feel those shares are undervalued.
D)  Stock dividends may come at the expense of forgoing positive net present value projects.
E)  Stock repurchases send the exact same signals to investors as cash dividends send.F) A) and B)
G) None of the above

Exam 14: Dividends and Dividend Policy

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

Correct Answer
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During the past year, ABC stock has sold for as little as $19 a share and a much as $33 a share.Which one of the following terms applies to these prices?

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

Correct Answer
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Correct Answer
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Which one of the following events must occur before a firm can offer a liquidating dividend?

Correct Answer
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Assume there are no taxes or imperfections.Given this assumption, which one of the following statements is correct?

Correct Answer
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Which statement is correct?

Correct Answer
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Innovative Technologies has 46,000 shares of stock outstanding at a market price of $6 a share.Which one of the following stock splits should the firm declare if it wants to increase the stock price to exactly $16 a share? Ignore any taxes or market imperfections.

Correct Answer
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Tuesday, December 1, is the ex-dividend date for Alpha stock.Which one of the following dates is the record date? Assume there are no banking holidays to consider.

Correct Answer
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Which one of these favors a high-dividend payout?

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

Correct Answer
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Assume that satisfied clienteles exist.Given this assumption, which one of these statements is correct?

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

Correct Answer
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Oak Tree Farms has common stock outstanding at a price of $13 a share.The total market value of the equity is $435,000.How many shares of stock will be outstanding if the firm does a reverse stock split of 2-for-5?

Correct Answer
verified

Exam 14: Dividends and Dividend Policy

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

Correct AnswerverifiedShow Answer

During the past year, ABC stock has sold for as little as $19 a share and a much as $33 a share.Which one of the following terms applies to these prices?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Which one of the following events must occur before a firm can offer a liquidating dividend?

Correct AnswerverifiedShow Answer

Assume there are no taxes or imperfections.Given this assumption, which one of the following statements is correct?

Correct AnswerverifiedShow Answer

Which statement is correct?

Correct AnswerverifiedShow Answer

Innovative Technologies has 46,000 shares of stock outstanding at a market price of $6 a share.Which one of the following stock splits should the firm declare if it wants to increase the stock price to exactly $16 a share? Ignore any taxes or market imperfections.

Correct AnswerverifiedShow Answer

Tuesday, December 1, is the ex-dividend date for Alpha stock.Which one of the following dates is the record date? Assume there are no banking holidays to consider.

Correct AnswerverifiedShow Answer

Which one of these favors a high-dividend payout?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Assume that satisfied clienteles exist.Given this assumption, which one of these statements is correct?

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Oak Tree Farms has common stock outstanding at a price of $13 a share.The total market value of the equity is $435,000.How many shares of stock will be outstanding if the firm does a reverse stock split of 2-for-5?

Correct AnswerverifiedShow Answer

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