Exam 14: Payout Policy

In a 2-for-1 stock split, the number of shares outstanding decreases by fifty percent and the stock's per-share par value will double.

A dividend reinvestment plan enables stockholders to

The shareholder receiving a stock dividend receives a share of common stock of equal value to their existing shares of common stock.

The dividend decisions can significantly affect the firm's share price and external financing requirements.

Modigliani and Miller argue that when the firm has no acceptable investment opportunities, it should

Modigliani and Miller, recognizing that dividends do somehow affect stock prices, suggest that positive effects of dividend increases are attributable

Dividend reinvestment plans (DRIPs) enable stockholders to use dividends received on the firm's stock to acquire additional shares or fractional shares at little or no transaction (brokerage) cost.

The factors involved in setting a dividend policy include all of the following EXCEPT

If the stock dividend is paid so that cash can be retained to satisfy past-due bills, a decline in market value may result.

After the stock dividend is paid, the per share value of the stockholder's stock will remain the same as the value before the stock dividend and, thus, the market value of his or her total holdings in the firm will remain unchanged.

Tangshan Mining has 100,000 shares outstanding and just declared a 2-for-1 stock split. Before the announcement, the firm's shares were trading at $50.00 per share. After the stock dividend, the firm's shares should trade at ________ per share.

Enhancement of shareholder value through stock repurchase is achieved by

At a firm's quarterly dividend meeting held on December 5, the directors declared a $1.50 per share cash dividend to be paid to the holders of record on Monday, January 1. Before the dividend was declared, the firm's accumulated retained earnings balance and cash balance were $1,280,000 and $30,000 respectively. The firm has 10,000 shares of common stock outstanding. On January 2, the cash, dividends payable, and retained earnings accounts had balances of

Shareholder wealth considerations in the payment of dividends include all of the following EXCEPT

The accounting in a stock split will transfer funds

The dividend payment date is set by the firm's chief executive officer and represents the actual date on which the firm mails the dividend payment to the holders of record.

The most commonly used dividend policies are all of the following EXCEPT

The Jobs Growth Tax Relief Reconciliation Act of 2003 significantly changed the tax treatment of corporate dividends for most taxpayers by dropping the tax rate to the rate applicable on capital gains, which is a maximum rate of 15%.

In case of stock dividend, the shareholder's proportion of ownership in the firm remains the same, and as long as the firm's earnings remain unchanged, so does his or her share of total earnings.

A firm has had the indicated earnings per share over the last three years: (a) If the firm's dividend policy was based on a constant payout ratio of 50 percent, determine the annual dividend for each year. (b) If the firm's dividend policy was based on a fixed dollar payout policy of 50 cents per share plus an extra dividend equal to 75 percent of earnings per share above $1.00, determine the annual dividend for each year.