Exam 13: Dividend Policy and Internal Financing

A corporation with very high growth prospects and many positive NPV projects to fund may want to increase its dividend based on

Analysis of dividend policy begins with the basic assumption that shareholder wealth maximization is the primary goal,and therefore dividends should be of primary concern even if their payment results in capital rationing.

Dividends generally

Stock repurchases do not alter a company's capital structure since all of the purchased shares are retired and no longer outstanding.

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

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

How frequently do corporations generally pay dividends?

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.

An investor who requires a 17% percent return for a stock that pays no dividends and requires a 13% return for a stock that pays its entire return from dividends is most likely a proponent of

All of the following factors support the proposition that dividend policy matters except:

The correct order of dividend process dates is

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

The information effect hypothesis implies that increasing dividends provides a more credible signal of higher future earnings than does management's assertion that future earnings will be higher.

The CEO of Marletti Pasta Company 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?

Corporation A announces is quarterly dividend will increase from $3.80 to $4.00.After the announcement,the price of Corporation A's stock drops.The most likely explanation is that

Other things equal,in imperfect markets a firm that maintains a stable dividend will have a lower required rate of return on its equity.

A stock repurchase plan that involves issuing long-term debt to fund the purchase of the company's stock may be used as a way to alter a corporation's capital structure.

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

Assume that the tax on dividends and the tax on capital gains is the same.All else equal,what would a prudent investor prefer?

The problem with the constant dividend payout ratio is