A) $30.60
B) $29.10
C) $30.00
D) $24.30
E) $23.70
G) A) and E)
Correct Answer
verified
Correct Answer
verified
A) When firms are deciding on the size of stock splits--say whether to declare a 2-for-1 split or a 3-for-1 split,it is best to declare the smaller one,in this case the 2-for-1 split,because then the after-split price will be higher than if the 3-for-1 split had been used.
B) Back before the SEC was created in the 1930s,companies would declare reverse splits in order to boost their stock prices.However,this was determined to be a deceptive practice,and reverse splits are illegal today.
C) Stock splits create more administrative problems for investors than stock dividends,especially determining the tax basis of their shares when they decide to sell them,so today stock dividends are used far more often than stock splits.
D) When a company declares a stock split,the price of the stock typically declines--for example,by about 50% after a 2-for-1 split--and this necessarily reduces the total market value of the firm's equity.
E) If a firm's stock price is quite high relative to most stocks--say $500 per share--then it can declare a stock split of say 20-for-1 so as to bring the price down to something close to $25.Moreover,if the price is relatively low--say $2 per share--then it can declare a "reverse split" of say 1-for-10 so as to bring the price up to somewhere around $20 per share.
G) A) and D)
Correct Answer
verified
Correct Answer
verified
A) Historically,the tax code has encouraged companies to pay dividends rather than retain earnings.
B) If a company uses the residual dividend model to determine its dividend payments,dividend payout will tend to increase whenever its profitable investment opportunities increase relatively rapidly.
C) The more a firm's management believes in the clientele effect,the more likely the firm is to adhere strictly to the residual dividend model.
D) Large stock repurchases financed by debt tend to increase expected earnings per share,but they also tend to increase the firm's financial risk.
E) A dollar paid out to repurchase stock has the same tax benefit as a dollar paid out in dividends.Thus,both companies and investors should be indifferent between distributing cash through dividends and stock repurchase programs.
G) A) and C)
Correct Answer
verified
Correct Answer
verified
B) False
Correct Answer
verified
Correct Answer
verified
A) $42.92
B) $53.65
C) $49.63
D) $44.71
E) $38.00
G) None of the above
Correct Answer
verified
Correct Answer
verified
A) 46.71%
B) 60.97%
C) 36.88%
D) 44.26%
E) 49.17%
G) D) and E)
Correct Answer
verified
Correct Answer
verified
A) the same dividend as it paid the prior year.
B) no dividends to common stockholders.
C) dividends only out of funds raised by the sale of new common stock.
D) dividends only out of funds raised by borrowing money (i.e. ,issuing debt) .
E) dividends only out of funds raised by selling off fixed assets.
G) A) and D)
Correct Answer
verified
Correct Answer
verified
A) 75.4%
B) 86.7%
C) 58.8%
D) 88.2%
E) 89.0%
G) B) and D)
Correct Answer
verified
Correct Answer
verified
B) False
Correct Answer
verified
Correct Answer
verified
A) $2,957,400
B) $2,718,900
C) $1,860,300
D) $2,385,000
E) $1,955,700
G) C) and D)
Correct Answer
verified
Correct Answer
verified
A) 1.54
B) 1.30
C) 1.63
D) 1.46
E) 2.11
G) B) and D)
Correct Answer
verified
Correct Answer
verified
A) Firms with a lot of good investment opportunities and a relatively small amount of cash tend to have above-average dividend payout ratios.
B) One advantage of the residual dividend model is that it leads to a stable dividend payout,which investors like.
C) An increase in the stock price when a company cuts its dividend is consistent with signaling theory as postulated by MM.
D) If the "clientele effect" is correct,then for a company whose earnings fluctuate,a policy of paying a constant percentage of net income will probably maximize its stock price.
E) Stock repurchases make the most sense at times when a company believes its stock is undervalued.
G) A) and C)
Correct Answer
verified
Correct Answer
verified
A) Under the tax laws as they existed in 2017,a dollar received by an individual taxpayer as interest income is taxed at the same rate as a dollar received as dividends.
B) One nice feature of dividend reinvestment plans (DRIPs) is that they reduce the taxes investors would have to pay if they received cash dividends.
C) Empirical research indicates that,in general,companies send a negative signal to the marketplace when they announce an increase in the dividend.As a result,share prices fall when dividend increases are announced because investors interpret the increase as a signal that the firm expects fewer good investment opportunities in the future.
D) If a company needs to raise new equity capital,a new-stock dividend reinvestment plan would make sense.However,if the firm does not need new equity,then an open market purchase dividend reinvestment plan would probably make more sense.
E) Dividend reinvestment plans have not caught on in most industries,and today over 99% of all DRIPs are offered by utilities.
G) A) and E)
Correct Answer
verified
Correct Answer
verified
A) $316,200
B) $211,650
C) $234,600
D) $255,000
E) $193,800
G) A) and E)
Correct Answer
verified
Correct Answer
verified
B) False
Correct Answer
verified
Correct Answer
verified
B) False
Correct Answer
verified
Correct Answer
verified
B) False
Correct Answer
verified
Correct Answer
verified
A) If a firm repurchases some of its stock in the open market,then shareholders who sell their stock for more than they paid for it will be subject to capital gains taxes.
B) An open-market dividend reinvestment plan will be most attractive to companies that need new equity and would otherwise have to issue additional shares of common stock through investment bankers.
C) Stock repurchases tend to reduce financial leverage.
D) If a company declares a 2-for-1 stock split,its stock price should roughly double.
E) One advantage of adopting the residual dividend model is that this makes it easier for corporations to meet the requirements of Modigliani and Miller's dividend clientele theory.
G) D) and E)
Correct Answer
verified
Correct Answer
verified
B) False
Correct Answer
verified
Correct Answer
verified
B) False
Correct Answer
verified
Correct Answer
verified
Showing 41 - 60 of 75
Related Exams