Exam 13: Dividend Policy and Internal Financing

Each of the following factors may cause a corporation to lower its dividend payout ratio EXCEPT

According to the clientele effect,

One potential reason for a share repurchase is

Which of the following strategies may be used to alter a firm's capital structure toward a higher percentage of debt compared to equity?

Shareholders may prefer a share repurchase program to dividends because dividends are subject to taxation and increasing value per share due to repurchase programs is tax deferred.

Quantum,Inc.declared a $2 per share dividend on October 1.The date of record is October 20th,the ex-dividend date is October 18th,and the payment date is October 31st.Mitchell owns a share of stock on October 1.Mitchell sells his share to Gene on October 18th,Gene sells the share to Dimitri on October 20th,and Dimitri sells the share to Hank on October 30th.Who will receive the dividend?

The correct order of dividend process dates is

The ex-dividend date is typically two days prior to the payment date of the dividend.

You are a retired worker whose income is derived from your company pension plan and social security.However,you are highly dependent upon the income generated from your 401(k)plan,which is heavily weighted in stocks that pay substantial dividends.Which of the following dividend policies would you prefer?

What is the information effect associated with dividends? Why does it occur?

Which of the following dividend policies will cause dividends per share to fluctuate the most?

A fast-growing company with many high net present value projects may maximize shareholder wealth by NOT paying a dividend.

According to the perfect markets approach to dividend policy,

After a stock split of 2:1,each investor will have twice the number of shares,but the same percentage ownership in the firm that he had before the split.

From the shareholders' perspective,a stock repurchase has a potential tax advantage over the payment of a cash dividend.

The information effect suggests dividend policy matters because dividends act as a persuasive communications tool,signaling investors about the financial condition of the firm.

AFB,Inc.'s dividend policy is to maintain a constant payout ratio.This year AFB,Inc.paid out a total of $2 million in dividends.Next year,AFB,Inc.'s sales and earnings per share are expected to increase.Dividend payments are expected to

Trevor Co.'s future earnings for the next four years are predicted below.Assuming there are 500,000 shares outstanding,what will the yearly dividend per share be if the dividend policy is Trevor & Co. 1 $900,000 2 1,200,000 3 850,000 4 1,350,000 a.a constant payout ratio of 40% b.stable dollar dividend targeted at 40% of the average earnings over the four-year period c.small,regular dividend of $0.75 plus a year-end extra of 40% of profits exceeding $1,000,000

AFB,Inc.had earnings per share of $4 per share last year and paid a dividend of $1 per share.For the current year,AFB,Inc.generated earnings per share of $6 and paid a dividend of $1 per share.This is an example of what type of dividend policy?

Which of the following factors would most likely be present if a company increases its dividend payout ratio significantly?