Exam 13: Dividend Policy and Internal Financing

Describe the three divergent views of dividend policy's effect on share price.

A 100% stock dividend and a 2-for-1 stock split will result in the same number of shares of stock being held by investors after the transaction is completed.

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?

Which of the following statements concerning stock repurchases is MOST correct?

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

All of the following are likely to result in a lower dividend,other things the same,EXCEPT

A firm's dividend policy includes two basic components: the dividend payout ratio and dividend stability.

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

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?

AFB,Inc.declared a dividend of $2 per share,which was an increase of 25% from the prior year,yet AFB,Inc.stock declined by 3% the day of the announcement.DAS,Inc.declared a dividend of $2 per share,which was the same as the prior year,and its stock increased in value by 2% on the day of the announcement.These events could be most readily explained by the

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?

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

Assume that a firm has a steady record of paying high dividends for years.A new management team decided to cut the current year's dividend in half without disclosing why.The market value of the stock fell 35% on the day the dividend cut was announced.Which of the following would best explain the stock market's reaction to the announcement?

Conceptually,stock dividends and stock splits may be expected to increase the shareholder's value.

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

AFB,Inc.stock is currently selling for $20 per share.The company completed a 5-for-1 stock split two days earlier.Two years ago,the company had a 2-for-1 stock split.If the stock splits had not happened,the price of AFB,Inc.stock would,other things being equal,be

Kelly owns 10,000 shares in McCormick Spices,which currently has 500,000 shares outstanding.The stock sells for $86 on the open market.McCormick's management has decided on a two-for-one split. a.Will Kelly's financial position change after the split,assuming that the stock's price will fall proportionately? b.Assuming only a 35% decrease in the stock price,what will be Kelly's value after the split?

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

In order to maximize shareholder value,a corporation must earn a higher rate of return on a dollar that is retained in the corporation than the shareholders can earn by investing the dollar elsewhere.