Exam 13: Dividend Policy and Internal Financing

If John owns 5% of XYZ Corporation before its 2 for 1 stock split,John will own 5% of XYZ Corporation after the stock split as well.

Which of the following transactions will decrease a corporation's retained earnings?

Sinkmaster Corp.settled a large lawsuit that caused earnings to be negative for the quarter.This quarterly loss was the first in 22 years.In addition,the company has a record of 48 consecutive quarters of dividend payments.Which of the following is correct?

The difference between the capital gains tax rate and the income tax rate is an incentive for

A stock repurchase plan can be viewed as both a financing decision and an investment decision.

High dividends may increase stock values due to all of the following reasons EXCEPT

How frequently do corporations generally pay dividends?

According to the "bird-in-the-hand" dividend theory,the required return for a stock that pays its entire return from dividends is higher than the required return for a high-growth stock that pays no dividend.

The higher the dividend payout ratio,the more a company must rely on external financing.

Outpost has 2 million shares of common stock outstanding; net income is $300,000; the P/E ratio is 9; and management is considering an 18% stock dividend.What will be the expected effect on the price of the common stock? If an investor owns 300 shares in the company,how does this change his total value? Explain.

Within the context of a stock repurchase,what is meant by a tender offer?

Under the ideal conditions of perfect capital markets,dividend policy has no effect upon share price.

While Rogue Corporation has been in business for over 50 years,newly developed products pushed the firm's year-over-year growth rate to 35% during the latest three years.The firm is proud of its history of paying dividends,but the vigorous recent growth of the firm has left it cash challenged.Which of the following policies/procedures would you consider best under the circumstances?

The president of Smith Brothers,Inc.wants a dividend policy that minimizes the likelihood of decreasing the company's dividend per share.Which of the following policies should the CEO select?

An investor who requires a 12% percent return for a stock that pays no dividends and requires a 9% return for a stock that pays its entire return from dividends is most likely a proponent of

The dividend irrelevance hypothesis is based on all of the following assumptions EXCEPT

What is the difference between a stock split and a stock dividend?

A firm that maintains a "stable dollar dividend per share" will generally not increase the dividend unless

According to the expectations theory,the actual dividend must equal the expected dividend,or else the stock price will decrease after the dividend amount is announced.

A stock dividend differs from a stock split because in a stock split,the par value of the company's stock is reduced,while the par value remains the same after a stock dividend is paid.