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Kelsey International declared a dividend on Friday, November 13, that is payable on Friday, December 4, 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) Tuesday, November 24
B) Wednesday, November 25
C) Thursday, November 26
D) Friday, November 27
E) Monday, November 30

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

Correct Answer

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What percent of capital gains are excluded from taxation for corporate shareholders?


A) 0 percent
B) 10 percent
C) 25 percent
D) 70 percent
E) 75 percent

F) B) and E)
G) B) and D)

Correct Answer

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Which of the following are factors that help explain why the percentage of U.S. industrial firms paying dividends has increased since the early 2000s? I. decrease in the number of non-dividend paying firms II) maturing of young, successful firms III) signaling of a firm's financial health IV) May 2003 tax act


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 IV

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

Correct Answer

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Keyser Trucking just paid its annual regular cash dividend of $1.22 a share, along with a special dividend of $0.25 a share. The company follows a policy of increasing its dividend by 2 percent annually. Which one of the following is the best estimate of the firm's next annual dividend payment?


A) $1.22
B) $1.24
C) $1.49
D) $1.50
E) $1.54

F) B) and E)
G) B) and D)

Correct Answer

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Which of the following are means by which a firm can reduce its number of outstanding shares? I. open market purchase II) rights offer III) tender offer IV) targeted repurchase


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

F) B) and D)
G) A) and B)

Correct Answer

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Zacariah'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 paying an annual cash dividend of $0.80 a share. Ignore taxes. What will the earnings per share be after the dividend is paid?


A) $0.31
B) $0.74
C) $1.54
D) $20.70
E) $21.02

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

Correct Answer

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On which one of the following dates are dividend checks mailed?


A) Date of record
B) Ex-dividend date
C) Payment date
D) Declaration date
E) Public announcement date

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

Correct Answer

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Southern Foods recently liquidated its fast food division. That unit represented 20 percent of the firm's overall market value. Prior to the liquidation, the firm's stock was selling for $43 a share, the annual dividend was steady at $1.20 per share, and there were 16,000 shares outstanding. The firm is preparing to distribute the entire liquidation proceeds to shareholders. How much will the liquidating dividend be per share?


A) $0.24
B) $0.36
C) $6.10
D) $7.40
E) $8.60

F) A) and D)
G) A) and B)

Correct Answer

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Martha's Baked Goods has 15,000 shares of stock outstanding at a market price of $24.10 per share. What will the price per share be after the firm declares a 5 percent stock dividend? Ignore taxes and market imperfections.


A) $22.90
B) $22.95
C) $24.10
D) $25.31
E) $25.40

F) B) and D)
G) D) and E)

Correct Answer

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The common stock of Gallaghan's closed at $36.80 a share today. Tomorrow morning, the stock goes ex-dividend. The dividend that is being paid this quarter is $1.40 a share. The tax rate on dividends is 15 percent. All else equal, what should the opening stock price be tomorrow morning?


A) $35.19
B) $35.40
C) $35.52
D) $35.61
E) $35.70

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

Correct Answer

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Given the current tax laws, which one of the following statements is correct?


A) Both stock repurchases and cash dividends are treated equally for tax purposes for individual shareholders.
B) Stock repurchases give individual shareholders more control over their personal taxes than do cash dividends.
C) Cash dividends are preferable to stock repurchases from the individual shareholder point of view.
D) Stock repurchases offer more tax benefits to the issuer than do cash dividends.
E) Cash dividends offer more tax benefits than do stock repurchases for the issuer.

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

Correct Answer

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Harris Brothers just announced it will be paying an annual dividend of $0.85 a share plus an extra dividend of $0.30 a share this year. The company also announced that its regular dividend, which is all it anticipates paying after this year, will increase by 3.5 percent annually. What is the anticipated dividend per share next year?


A) $0.82
B) $0.85
C) $0.88
D) $1.15
E) $1.19

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

Correct Answer

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Which one of the following statements is correct concerning dividends in the U.S.?


A) The total amount of dividends paid by the S&P 500 companies has increased steadily every year since 1985.
B) Only financial sector firms decreased dividends in 2008.
C) Dividend amounts tend to react quickly to changes in the economy.
D) Firms tend to quickly adjust their dividends to changes in the firm's earnings per share.
E) There are less than 75 companies in the U.S. that have consistently increased their dividends for at least the past 25 years.

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

Correct Answer

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Which one of the following is a non-cash payment made by a firm to its shareholders and is a payment that lessens the value of each outstanding share?


A) Reverse stock split
B) Cash distribution
C) Stock dividend
D) Regular dividend
E) Liquidating dividend

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

Correct Answer

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


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

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

Correct Answer

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Neal Fabricators just liquidated its poorest performing division and realized net proceeds from the transaction of $2.6 million. The firm has 180,000 shares of stock outstanding at a market price of $64 a share. Which one of the following is the best estimate of the stock's post-dividend price per share if the firm distributes the entire liquidation proceeds in the form of a liquidating dividend? Ignore taxes and market imperfections.


A) $49.56
B) $51.38
C) $53.40
D) $58.79
E) $64.00

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

Correct Answer

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


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

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?


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

F) A) and C)
G) C) and D)

Correct Answer

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Martin & Martin, Inc. stock is currently selling for $19 per share. The firm just made an offer to one of its major shareholders to repurchase all the shares owned by that shareholder for $25 per share. What type of offer is being made?


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

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

Correct Answer

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Gloria's Boutique has 4,000 shares of stock outstanding at a price per share of $19. The firm has decided to repurchase 500 of those shares in the open market. What will the price per share be after the share repurchase is completed? Ignore taxes and market imperfections.


A) $17.80
B) $18.40
C) $18.80
D) $19.00
E) $20.20

F) B) and E)
G) C) and D)

Correct Answer

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