Question 1

In Canada, for open-market share repurchases, companies must gain approval for these bids from the stock exchange.

Accepted Answer

A) True 
 B)False

Question 2

According to the residual theory of dividends, if the firm's equity need is less than the amount ofretained earnings, the firm would

Accepted Answer

A)  pay no cash dividends. 
B)  not need to consider its dividend policy. 
C)  declare a dividend equal to the remaining balance. 
D)  borrow to pay the cash dividend. 
A)  pay no cash dividends. 
B)  not need to consider its dividend policy. 
C)  declare a dividend equal to the remaining balance. 
D)  borrow to pay the cash dividend.

Question 3

Capital gains are

Accepted Answer

A)  grossed-up by 25% before federal and provincial taxes are calculated. 
B)  taxed at 75% of the investors marginal tax rate. 
C)  taxed as ordinary income. 
D)  taxed at 50% of the investors marginal tax rate. 
A)  grossed-up by 25% before federal and provincial taxes are calculated. 
B)  taxed at 75% of the investors marginal tax rate. 
C)  taxed as ordinary income. 
D)  taxed at 50% of the investors marginal tax rate.

Question 4

The dividend policy must be formulated considering two basic objectives, namely

Accepted Answer

A)  maximizing shareholder wealth and delaying the tax liability of the stockholder. 
B)  maximizing shareholder wealth and providing for sufficient financing. 
C)  maintaining liquidity and minimizing the weighted average cost of capital. 
D)  delaying the tax liability of the stockholder and informational content. 
A)  maximizing shareholder wealth and delaying the tax liability of the stockholder. 
B)  maximizing shareholder wealth and providing for sufficient financing. 
C)  maintaining liquidity and minimizing the weighted average cost of capital. 
D)  delaying the tax liability of the stockholder and informational content.

Question 5

High income investors prefer securities

Accepted Answer

A)  that payout all their income in dividends. 
B)  that reinvest earnings in new projects. 
C)  that have limited growth prospects. 
D)  that pay regular dividends. 
A)  that payout all their income in dividends. 
B)  that reinvest earnings in new projects. 
C)  that have limited growth prospects. 
D)  that pay regular dividends.

Question 6

The payment of cash dividends to corporate stockholders is decided by the firm's chief financialofficer.

Accepted Answer

A) True 
 B)False

Question 7

The "treasury stock" is an accounting entry on the firm's balance sheet to designate the firm's total investment in government securities.

Accepted Answer

A) True 
 B)False

Question 8

In Canada, investors would prefer a stock repurchase to a cash dividend since

Accepted Answer

A)  stock repurchases provide the investor with an option, the investor can sell his securities or keep them. 
B)  the investor can control whether he/she wants taxable income or not. 
C)  capital gains are taxed more favourably than dividend income. 
D)  all of the above. 
A)  stock repurchases provide the investor with an option, the investor can sell his securities or keep them. 
B)  the investor can control whether he/she wants taxable income or not. 
C)  capital gains are taxed more favourably than dividend income. 
D)  all of the above.

Question 9

Stock repurchases may be made for all of the following reasons EXCEPT

Accepted Answer

A)  to make shares available for stock option plans. 
B)  to help discourage an unfriendly take-over by reducing the number of publicly traded shares. 
C)  to enhance shareholder value by reducing the number of shares outstanding and thereby raising earnings per share. 
D)  to make shares available for stock dividends. 
A)  to make shares available for stock option plans. 
B)  to help discourage an unfriendly take-over by reducing the number of publicly traded shares. 
C)  to enhance shareholder value by reducing the number of shares outstanding and thereby raising earnings per share. 
D)  to make shares available for stock dividends.

Question 10

The purpose of a stock split is to

Accepted Answer

A)  increase the dividend. 
B)  issue additional shares. 
C)  reduce trading activity. 
D)  reduce the price of stock. 
A)  increase the dividend. 
B)  issue additional shares. 
C)  reduce trading activity. 
D)  reduce the price of stock.

Question 11

_________plans allow shareholders to make optional cash contributions, either monthly or quarterly up to some maximum amount, that are then used to purchase additional common shares for the investor.

Accepted Answer

A)  Stock repurchase 
B)  Share purchase 
C)  Dividend reinvestment 
D)  Dividend decision 
A)  Stock repurchase 
B)  Share purchase 
C)  Dividend reinvestment 
D)  Dividend decision

Question 12

If the stock dividend is paid so that cash can be retained to satisfy past-due bills, a decline in market value may result.

Accepted Answer

A) True 
 B)False

Question 13

Regular dividend policy is a dividend policy based on the payment of a certain percentage of earnings to owners in each dividend period.

Accepted Answer

A) True 
 B)False

Question 14

The purpose of a stock split is to

Accepted Answer

A)  increase the market price of the stock. 
B)  enhance the trading activity of the stock by lowering the market price. 
C)  decrease the dividend. 
D)  affect the firm's capital structure. 
A)  increase the market price of the stock. 
B)  enhance the trading activity of the stock by lowering the market price. 
C)  decrease the dividend. 
D)  affect the firm's capital structure.

Question 15

In Canada, capital gains are taxed at only 50% of the investor's marginal tax rate.

Accepted Answer

A) True 
 B)False

Question 16

Modigliani and Miller, recognizing that dividends do somehow affect stock prices, suggest thatpositive effects of dividend increases are attributable

Accepted Answer

A)  directly to the optimal capital structure. 
B)  not to the informational content but to the consistency in the payment of dividends. 
C)  directly to the dividend policy. 
D)  not to the dividend itself but to the informational content of the dividends with respect to future earnings. 
A)  directly to the optimal capital structure. 
B)  not to the informational content but to the consistency in the payment of dividends. 
C)  directly to the dividend policy. 
D)  not to the dividend itself but to the informational content of the dividends with respect to future earnings.

Question 17

Modigliani and Miller suggest that the value of the firm is not affected by the firm's dividend policy, due to

Accepted Answer

A)  the clientele effect. 
B)  the informational content. 
C)  the optimal capital structure. 
D)  the relevance of dividends. 
A)  the clientele effect. 
B)  the informational content. 
C)  the optimal capital structure. 
D)  the relevance of dividends.

Question 18

The repurchase of stock_________the earnings per share and _________ 	the market price of stock.

Accepted Answer

A)  increases; decreases 
B)  decreases; decreases 
C)  decreases; increases 
D)  increases; increases 
A)  increases; decreases 
B)  decreases; decreases 
C)  decreases; increases 
D)  increases; increases

Question 19

Modigliani and Miller argue that when the firm has no acceptable investment opportunities, it should

Accepted Answer

A)  close its doors. 
B)  lower its cost of capital. 
C)  distribute the unneeded funds to the owners. 
D)  retain the funds until an acceptable project arises. 
A)  close its doors. 
B)  lower its cost of capital. 
C)  distribute the unneeded funds to the owners. 
D)  retain the funds until an acceptable project arises.

Question 20

The residual theory of dividends tends to suggest that the required return of investors is not influenced by the firm's dividend policy and, thus, dividend policy is irrelevant.

Accepted Answer

A) True 
 B)False

In Canada, for open-market share repurchases, companies must gain approval for these bids from the stock exchange.

According to the residual theory of dividends, if the firm's equity need is less than the amount ofretained earnings, the firm would

Capital gains are

The dividend policy must be formulated considering two basic objectives, namely

High income investors prefer securities

The payment of cash dividends to corporate stockholders is decided by the firm's chief financialofficer.

The "treasury stock" is an accounting entry on the firm's balance sheet to designate the firm's total investment in government securities.

In Canada, investors would prefer a stock repurchase to a cash dividend since

Stock repurchases may be made for all of the following reasons EXCEPT

The purpose of a stock split is to

_________plans allow shareholders to make optional cash contributions, either monthly or quarterly up to some maximum amount, that are then used to purchase additional common shares for the investor.

If the stock dividend is paid so that cash can be retained to satisfy past-due bills, a decline in market value may result.

Regular dividend policy is a dividend policy based on the payment of a certain percentage of earnings to owners in each dividend period.

The purpose of a stock split is to

In Canada, capital gains are taxed at only 50% of the investor's marginal tax rate.

Modigliani and Miller, recognizing that dividends do somehow affect stock prices, suggest thatpositive effects of dividend increases are attributable

Modigliani and Miller suggest that the value of the firm is not affected by the firm's dividend policy, due to

The repurchase of stock_the earnings per share and _ the market price of stock.

Modigliani and Miller argue that when the firm has no acceptable investment opportunities, it should

The residual theory of dividends tends to suggest that the required return of investors is not influenced by the firm's dividend policy and, thus, dividend policy is irrelevant.

Overview of Corporate Finance

Financial Statements, Cash Flows, and Taxes

Financial Statement Analysis

Financial Planning and Forecasting

Financial Markets, Institutions, and Securities

Time Value of Money

Risk and Return

Valuation of Financial Securities

The Cost of Capital

Leverage and Capital Structure

Capital Budgeting: Principles and Techniques

Dealing With Project Risk and Other Topics in Capital Budgeting

Working Capital and Management of Current Assets

Management of Current Liabilities

Lease Financing: Concepts and Techniques

Corporate Securities, Derivatives, and Swaps

Mergers and Acquisitions, and Business Failure

International Corporate Finance

Filters

Exam 11: Dividend Policy

In Canada, for open-market share repurchases, companies must gain approval for these bids from the stock exchange.

According to the residual theory of dividends, if the firm's equity need is less than the amount ofretained earnings, the firm would

Capital gains are

The dividend policy must be formulated considering two basic objectives, namely

High income investors prefer securities

The payment of cash dividends to corporate stockholders is decided by the firm's chief financialofficer.

The "treasury stock" is an accounting entry on the firm's balance sheet to designate the firm's total investment in government securities.

In Canada, investors would prefer a stock repurchase to a cash dividend since

Stock repurchases may be made for all of the following reasons EXCEPT

The purpose of a stock split is to

_________plans allow shareholders to make optional cash contributions, either monthly or quarterly up to some maximum amount, that are then used to purchase additional common shares for the investor.

If the stock dividend is paid so that cash can be retained to satisfy past-due bills, a decline in market value may result.

Regular dividend policy is a dividend policy based on the payment of a certain percentage of earnings to owners in each dividend period.

The purpose of a stock split is to

In Canada, capital gains are taxed at only 50% of the investor's marginal tax rate.

Modigliani and Miller, recognizing that dividends do somehow affect stock prices, suggest thatpositive effects of dividend increases are attributable

Modigliani and Miller suggest that the value of the firm is not affected by the firm's dividend policy, due to

The repurchase of stock_________the earnings per share and _________ the market price of stock.

Modigliani and Miller argue that when the firm has no acceptable investment opportunities, it should

The residual theory of dividends tends to suggest that the required return of investors is not influenced by the firm's dividend policy and, thus, dividend policy is irrelevant.

Overview of Corporate Finance

Financial Statements, Cash Flows, and Taxes

Financial Statement Analysis

Financial Planning and Forecasting

Financial Markets, Institutions, and Securities

Time Value of Money

Risk and Return

Valuation of Financial Securities

The Cost of Capital

Leverage and Capital Structure

Capital Budgeting: Principles and Techniques

Dealing With Project Risk and Other Topics in Capital Budgeting

Working Capital and Management of Current Assets

Management of Current Liabilities

Lease Financing: Concepts and Techniques

Corporate Securities, Derivatives, and Swaps

Mergers and Acquisitions, and Business Failure

International Corporate Finance

Filters

The repurchase of stock_the earnings per share and _ the market price of stock.