Exam 13: Dividend Policy and Internal Financing

DAS,Inc.declared a $0.50 per share dividend on June 1.The date of record is June 20th,the ex-dividend date is June 18th,and the payment date is June 31st.Andre owns a share of stock on June 1.Andre sells his share to Brett on June 19th,and Brett sells the share to LaMarcus on June 29th.Who will receive the dividend?

If a company in a perfect capital market decreased its dividend per share,an investor would be forced to sell his common stock at a depressed price.

Statutory restrictions may prevent a company from paying dividends if the firm's assets are less than the firm's liabilities.

Federal tax law is irrelevant to corporate dividend policy because dividends are not tax deductible.

Which of the following statements would be consistent with the bird-in-the-hand dividend theory?

Share repurchases are not part of the stock valuation process because by definition the cash flow from a share repurchase ends the investment as the stock is no longer owned by the shareholder.

A firm's dividend policy provides information pertaining to the firm's payout ratio and its stability.

A firm's stock price may decline by less than 50% after a 2 for 1 stock split if the reduction in price moves the stock into its optimal trading range.

The existence of taxes can directly affect a common shareholder's preference for capital gains or dividend income.

If the tax rate on dividends and the tax rate on capital gains are the same,then investors are indifferent to dividend policy.

Which of the following statements would be consistent with the residual dividend theory?

Which of the following will result from a stock repurchase?

An increase in flotation costs will most likely result in which of the following?

As long as a firm has a positive level of retained earnings,it can pay a dividend.

Dryden,Corp.has 500,000 shares of common stock outstanding,a P/E ratio of 11,and $900,000 earnings available for common stockholders.The board of directors has just voted a 5:2 stock split. a.If you had 100 shares of stock before the split,how many shares will you have after the split? b.What was the total value of your investment in Dryden stock before the split? c.What should be the total value of your investment in Dryden stock after the split? d.In view of your answers to (b)and (c)above,why would a firm's management want to have a stock split?

Low dividends may increase stock value due to the advantage of tax deferral that comes with capital gains.

All of the following are potential benefits of stock repurchases EXCEPT

The residual dividend theory suggests that dividends should be paid to stockholders first,and then what is left can be reinvested by the firm.

EveningFall,Inc.pays a quarterly dividend of $3.40 per share.Which of the following statements is most accurate concerning which shareholders will receive the dividend payment?

Ted Tech Inc.is offering a 10% stock dividend.The firm currently has 200,000 shares outstanding and after-tax profits of $800,000.The current price of the stock is $48. a.Calculate the new earnings per share. b.What is the original price/earnings multiple? c.Providing that the price/earnings multiple stays the same,what will the new stock price be after the stock dividend?