Deck 17: Dividends and Payout Policy

Question 1

Which one of the following statements related to cash dividends is correct?

A) Extra cash dividends cannot be repeated in the future.
B) A dividend is never a liability of the issuer until it has been declared.
C) If a firm has paid regular quarterly dividends for at least five consecutive years, it is legally obligated to continue doing so.
D) Regular cash dividends reduce paid-in capital.
E) The dividend yield expresses the annual dividend as a percentage of net income.

Answer 1

A dividend is never a liability of the issuer until it has been declared.

Question 2

All else equal, the market value of a stock will tend to decrease by roughly the aftertax value of the dividend on the:

A) dividend declaration date.
B) ex-dividend date.
C) date of record.
D) date of payment.
E) day after the date of payment.

Answer 2

ex-dividend date.

Question 3

A $.45 quarterly cash payment paid by Jones & Co. to its shareholders in the normal course of business becomes a liability of the company on the:

A) day prior to the ex-dividend date.
B) date-of-record.
C) declaration date.
D) payment date.
E) ex-dividend date.

Answer 3

declaration date.

Question 4

Which one of the following tends to decrease the ability of a shareholder to create his or her own homemade dividend policy?

A) Low taxes on capital gains
B) Large holdings of shares
C) Dividend reinvestment plans
D) Low-cost equity purchases
E) High transaction fees

Question 5

Automatic dividend reinvestment plans:

A) require that participating stockholders reinvest all of the dividends to which they are entitled.
B) grant all participants a discount on share purchases.
C) increase the relevance of corporate dividend policies.
D) help shareholders create their own homemade dividend policies.
E) are no longer available in the U.S.

Question 6

Green Roof Motels has more cash on hand than its operations require. Thus, it has decided to pay out some of its earnings in the form of cash to its shareholders. What are these payments to shareholders called?

A) Dividends
B) Stock payments
C) Repurchases
D) Payments-in-kind
E) Stock splits

Question 7

Frozen Foods just paid out $3.62 a share to its shareholders. The cash for these payments came from a large sale of assets, not from any earnings of the firm. What are these payments to shareholders called?

A) Dividends
B) Distributions
C) Repurchases
D) Payments-in-kind
E) Stock splits

Question 8

The board of directors of Wilson Sporting Equipment met this afternoon and passed a resolution to pay a cash dividend of $.42 a share next month. In relation to this dividend, today is referred to as which one of the following dates?

A) Decision date
B) Date-of-record
C) Declaration date
D) Payment date
E) Ex-dividend date

Question 9

Which one of the following favors a low dividend policy?

A) The tax on capital gains is deferred until the gain is realized.
B) Few, if any, positive net present value projects are available to a firm.
C) A majority of the shareholders have a low tax rate.
D) A majority of the shareholders have better investment opportunities than the firm.
E) The presence of an agency conflict with the company's senior managers.

Question 10

Which one of the following refers to the ability of shareholders to undo a company's dividend policy and create an alternative dividend policy by reinvesting dividends or selling shares of stock?

A) Perfect foresight model
B) Personalization
C) Recapitalization
D) Offsetting leverage
E) Homemade dividend

Question 11

Kate purchased 500 shares of Fast Deliveries stock on Wednesday, July 7. Ted purchased 100 shares of Fast Deliveries stock on Thursday, July 8. Fast Deliveries declared a dividend on June 20 to shareholders of record on July 12 and payable on August 1. Which one of the following statements concerning the dividend paid on August 1 is correct given this information?

A) Neither Kate nor Ted is entitled to the dividend.
B) Kate is entitled to the dividend but Ted is not.
C) Ted is entitled to the dividend but Kate is not.
D) Both Ted and Kate are entitled to the dividend.
E) Both Ted and Kate are entitled to one-half of the dividend amount.

Question 12

The fact that flotation costs can be significant is an argument for:

A) issuing larger regular dividends than the industry norm.
B) maintaining a constant dividend policy even if the firm frequently has to issue new shares.
C) periodic extra dividend payments.
D) maintaining a constant dividend policy even when profits decline significantly.
E) maintaining a low dividend policy and rarely issuing extra dividends.

Question 13

The ex-dividend date is defined as ________ business day(s) prior to the date of record

A) 1
B) 2
C) 3
D) 5
E) 10

Question 14

Which type of dividend is considered to be a one-time event that will not be repeated?

A) Stock dividend
B) Extra cash dividend
C) Partial liquidating dividend
D) Special dividend
E) Regular cash dividend

Question 15

As of 2018, the maximum tax rate any individual would pay on dividend income is:

A) 10 percent.
B) 5 percent.
C) 20 percent.
D) 25 percent.
E) 21 percent.

Question 16

Bailey's decided on Friday, March 7, to pay a dividend of $.28 a share on Monday, April 7. The ex-dividend date is Tuesday, March 18. What is the date of record?

A) Friday, March 7
B) Monday, March 17
C) Friday, March 14
D) Thursday, March 20
E) Friday, March 21

Question 17

United Foods declared a dividend of $.62 a share on Thursday, October 16. The dividend will be paid on Monday, November 10, to shareholders of record on Friday, October 31. Which one of the following is the ex-dividend date?

A) Tuesday, October 28
B) Wednesday, October 29
C) Thursday, October 30
D) Wednesday, November 5
E) Thursday, November 6

Question 18

Which one of the following dates is used to determine the names of shareholders who will receive a dividend payment?

A) Ex-rights date
B) Ex-dividend date
C) Date of record
D) Date of payment
E) Declaration date

Question 19

The last date on which you can purchase shares of stock and still receive the next dividend is the date that is ________ business day(s) prior to the date of record.

A) one
B) two
C) three
D) four
E) five

Question 20

Which one of the following statements related to dividend policy is correct?

A) The primary question related to dividend policy is whether or not a dividend should ever be paid.
B) Both dividends and dividend policy are irrelevant.
C) Dividend policy focuses on the timing of dividend payments.
D) Homemade dividends increase the importance of a company's dividend policy decisions.
E) Whether or not a company ever pays a dividend is irrelevant to equity valuation.

Question 21

Which one of the following statements related to stock repurchases is correct?

A) U.S. industrial firms have increased their stock repurchases every year for each of the past 20 years.
B) The tax law change in May 2003 led to a huge increase in stock repurchases and a reduction in dividend payments.
C) A tender offer indicates that a company is willing and able to purchase as many shares as shareholders wish to sell.
D) All stock repurchases must be identified as such to the selling party.
E) Stock repurchases can be a relatively tax-efficient method of distributing cash to shareholders.

Question 22

A stock repurchase program:

A) requires all shareholders to sell a fraction of their shares.
B) is preferred over a high-dividend program only by tax-exempt shareholders.
C) decreases both the number of shares outstanding and the market price per share.
D) has no effect on a company's financial statements.
E) is essentially the same as a cash dividend program provided there are no taxes or other costs.

Question 23

Which one of the following factors tends to increase cash dividends?

A) Capital gains tax deferment
B) Terms contained in bond indentures
C) Corporate investors
D) Flotation costs
E) Homemade dividends

Question 24

What is the information content effect?

A) Any type of new information that causes a company to cease paying dividends
B) Any news announcement that was anticipated and thus produces no reaction from investors
C) The primary contributing data that helps directors determine the amount of a particular dividend payment
D) Any type of reaction from a shareholder in response to a news announcement related to the stock issuer
E) The financial market's reaction to a change in the amount of a company's dividend

Question 25

The dividend market is in equilibrium when:

A) all companies adopt a low dividend policy.
B) half of the companies adopt a low dividend policy and half adopt a high dividend policy.
C) all clienteles are satisfied.
D) dividends remain constant and no special dividends are declared.
E) the total amount of the annual dividends is equal to the net income for the year.

Question 26

If you ignore taxes and costs, a stock repurchase will:

A) increase the total assets of the firm.
B) increase the earnings per share.
C) increase the total equity of the firm.
D) reduce the PE ratio more than an equivalent stock dividend.
E) not affect the company's total assets.

Question 27

Which one of the following statements is correct?

A) Companies prefer to cut dividend payments rather than borrow money to fund a short-term cash need.
B) Share repurchases tend to increase agency costs.
C) Maintaining a steady dividend is a key goal of most dividend-paying companies.
D) Short-term fluctuations in cash flows are the key factor in determining a company's dividend policy.
E) Stock prices tend to ignore unexpected changes in dividend payments.

Question 28

Which one of the following involves a payment in shares that increases the number of shares a shareholder owns but also decreases the value per share?

A) Cash dividend
B) Stock dividend
C) Stock repurchase
D) Stock split
E) Reverse stock split

Question 29

Which one of the following does not affect the total equity of a company but does increase the number of shares outstanding?

A) Special dividend
B) Stock split
C) Share repurchase
D) Rights offer
E) Liquidating dividend

Question 30

Which one of the following statements is correct?

A) A reduction in personal tax rates tends to lead to lower dividends.
B) Dividends tend to fluctuate significantly from quarter to quarter.
C) Earnings growth tends to lag dividend growth.
D) Dividend payments are highly concentrated in a relatively small set of large companies.
E) Non-dividend-paying companies are generally more apt to commence paying regular dividends than to implement a stock repurchase program.

Question 31

Which one of the following is a result of a stock repurchase?

A) Increase in the number of shares outstanding
B) Increase in the market price per share
C) Increase in the total equity of the repurchasing firm
D) Decrease in EPS
E) PE ratio equal to that resulting from a comparable cash dividend

Question 32

The common stock of Dayton Dry Goods has historically had a low dividend yield that is expected to continue. As a result, the majority of its shareholders are individuals who prefer capital gains over cash dividends for tax reasons. The fact that most of these shareholders have similar characteristics is referred to as the ________ effect.

A) information content
B) clientele
C) investor
D) distribution
E) market reaction

Question 33

An investor is more likely to prefer a high dividend payout if that investor:

A) has a high marginal tax rate on dividends.
B) is a corporation.
C) pays a higher tax rate than the dividend payer.
D) does not require additional cash flows.
E) pays taxes on dividends but not on capital gains.

Question 34

Which one of the following statements appears to be supported by the current dividend policies of U.S. industrial firms?

A) Companies tend to increase the dividend amount per share, even when it's unclear if the increase can be maintained.
B) Investors no longer react to changes, either up or down, in dividends.
C) Newer, high-growth firms tend to pay larger dividends than mature firms.
D) Dividends are still viewed by shareholders as a signal of a company's future outlook.
E) Managers are no longer hesitant to lower dividend payments.

Question 35

Aaron owns 1,600 shares of LP Gas stock which he purchased six years ago at a price of $18 a share. Today, these shares are selling for $26 each. Assume a tax rate of 20 percent applies to both dividend income and capital gains received by individuals. Ignore costs. Given this hypothetical assumption, from Aaron's point of view a stock repurchase today would:

A) be equivalent to a cash dividend.
B) be more desirable than a cash dividend in respect to taxes.
C) result in the same tax liability as an equivalent cash dividend.
D) be more highly taxed than a cash dividend.
E) be totally unacceptable to him.

Question 36

Which one of the following statements related to stock repurchases is correct?

A) An open market stock repurchase increases the total wealth of a shareholder if you ignore taxes, costs, and market imperfections.
B) Targeted repurchases must be offered to all shareholders but can be done in steps such that only a portion of the shareholders have the option to sell at any one point in time.
C) When a company wishes to repurchase shares in the open market, it will do so in a special trading session that is set up by the SEC.
D) A company may spend more cash over the course of a year on stock repurchases than it does on cash dividends.
E) Tender offer prices must be set equal to the opening market price on the day the tender offer is announced.

Question 37

HJ Corporation has excess cash and has opted to buy some of its outstanding shares. What is this process of buying called?

A) Stock dividend
B) Stock split
C) Stock repurchase
D) Reverse stock split
E) Stock repeal

Question 38

Bell Weather Markets has recently sold for as little as $8 a share and as much as $15 a share. The difference between these two prices is referred to as the:

A) price variance.
B) bid-ask spread.
C) trading range.
D) opening price.
E) closing price.

Question 39

Moffatt Construction has paid a quarterly dividend of $1.25 per share for the last three years. Which one of the following is most apt to cause the company to reduce the amount of its next dividend payment?

A) Decrease in the next quarter's revenue
B) Decrease in the next quarter's net income
C) Loss of a major customer which lowers the overall company's outlook for the next few years
D) Major lump sum cash outflow next month to start a new project
E) Increase in the number of new projects under consideration as compared to prior years

Question 40

The information content of a dividend increase generally signals that:

A) the payer has a one-time surplus of cash.
B) the payer has few, if any, net present value projects to pursue.
C) management believes earnings growth will be strong going forward.
D) the payer has more cash than it needs due to a decline in future orders.
E) dividends thereafter will be lower.

Question 41

Revol-Tech is a technology company with excellent growth prospects. The company wishes to do something to acknowledge the loyalty of its shareholders but needs all of its available cash to fund its rapid growth. The market price of the stock is currently trading at the upper end of its preferred trading range. The company is most apt to consider which one of the following in this situation?

A) Liquidating dividend
B) Stock split
C) Reverse stock split
D) Extra cash dividend
E) Special cash dividend

Question 42

A one-for-four reverse stock split will increase:

A) the par value by 25 percent.
B) the number of shares outstanding by 400 percent.
C) the market value but not affect the par value per share.
D) a $1 par value to $4.
E) a $1 par value to $5.

Question 43

Which one of the following is a direct result of a two-for-one stock split?

A) A 100 percent increase in the number of shareholders
B) A 100 percent increase in the common stock account balance
C) A 100 percent decrease in the stock price
D) A 50 percent increase in the number of shares outstanding
E) A 50 percent decrease in the par value per share

Question 44

The market value balance sheet for Apple Pie Corp. reflects cash of $42,000, fixed assets of $319,000, and equity of $237,000. There are 7,500 shares of stock outstanding with a par value of $1 per share. The company has declared a dividend of $1.03 per share. The stock goes ex dividend tomorrow. Ignore any tax effects. What will be the price of the stock tomorrow morning?

A) $32.38
B) $32.20
C) $30.57
D) $32.15
E) $31.60

Question 45

Stock splits can be used to:

A) adjust the market price of a stock so it falls within a preferred trading range.
B) decrease a company's excess cash thereby lowering agency costs.
C) increase the par value per share while decreasing the market price per share.
D) increase the total equity of a firm.
E) adjust the debt-equity ratio to its preferred level.

Question 46

A stock split:

A) increases the total value of the common stock account.
B) decreases the value of the retained earnings account.
C) increases the par value per share.
D) increases the value of the capital in excess of par account.
E) decreases the market value per share.

Question 47

Aaron purchased 500 shares of KMP stock on May 8. On May 16, he purchased another 200 shares and then on May 20 he purchased a final 100 shares of KMP stock. The company declared a dividend of $.94 a share on May 6 to holders of record on Friday, May 22. The dividend is payable on June 12. How much dividend income will Steve receive on June 12?

A) $752
B) $640
C) $658
D) $728
E) $680

Question 48

Which one of the following is a result of a small stock dividend?

A) Increase in the retained earnings account balance
B) Decrease in total owner's equity
C) Decrease in cash
D) Decrease in capital in excess of par value
E) Increase in the common stock account balance

Question 49

Alta Gems stock is currently trading at $36 a share. The company believes its primary clientele can afford to spend between $2,000 and $2,500 to purchase a round lot of 100 shares. This company should consider a:

A) reverse stock split.
B) liquidating dividend.
C) stock dividend.
D) stock split.
E) special dividend.

Question 50

Which one of the following is the best justification for a reverse stock split?

A) Improve the stock's respectability
B) Avoid delisting
C) Reduce transaction costs for shareholders
D) Improve the stock's liquidity
E) Increase the par value per share

Question 51

A small stock dividend is defined as a stock dividend of less than ________ percent.

A) 10 to 15
B) 15 to 20
C) 20 to 25
D) 25 to 30
E) 30 to 35

Question 52

Plyler Cabinets declared a dividend of $1.32 per share on May 30 to holders of record on Monday, June 12. The dividend is payable on June 16. Sara purchased 300 shares of this stock on Thursday, June 8. How much dividend income will she receive on June 12 from these shares?

A) $0
B) $396
C) $167
D) $198
E) $132

Question 53

On July 9, you purchased 800 shares of Blue Water stock for $32 a share. On August 4, you sold 200 shares of this stock for $33 a share. You sold an additional 200 shares on August 14 at a price of $34.50 a share. The company declared a dividend of $.76 per share on August 3 to holders of record as of Monday, August 17. This dividend is payable on September 15. How much dividend income will you receive on September 15?

A) $304
B) $418
C) $456
D) $360
E) $608

Question 54

The Green Fiddle has declared a dividend of $2.60 per share. Suppose capital gains are not taxed but dividends are taxed at 15 percent. New IRS regulations require that taxes be withheld at the time the dividend is paid. Green Fiddle stock closed at $36.80 per share today and the stock goes ex dividend tomorrow. What will be the ex-dividend price?

A) $34.59
B) $39.40
C) $36.80
D) $34.20
E) $34.70

Question 55

A reverse stock split is defined as a(n):

A) increase in the number of shares outstanding.
B) company buying back existing shares of its stock on the open market.
C) company issuing additional shares to its existing shareholders.
D) decrease in the number of shares outstanding without affecting total owners' equity.
E) decrease in both the number of shares outstanding and the market price per share.

Question 56

A large stock dividend:

A) reduces retained earnings by the total market value of the issued shares.
B) reduces the par value per share.
C) reduces retained earnings by the par value of each share issued.
D) increases the capital in excess of par value by the market value minus the par value of each share issued.
E) does not affect the equity accounts or the par value per share.

Question 57

You own 900 shares of Dell Hardware. The company plans on issuing a dividend of $1.98 a share one year from now and then issuing a final liquidating dividend of $11.32 a share after one additional year. Your required rate of return on this security is 16.5 percent. Ignoring taxes, what is the value of one share of this stock to you today?

A) $10.30
B) $9.43
C) $10.04
D) $9.92
E) $10.32

Question 58

A company wants to maintain a stock price around $16 a share. Due to a recent market downturn, the stock is currently selling for $6 a share. The company should consider a ________ stock split.

A) 3-for-1
B) 4-for-1
C) 1-for-3 reverse
D) 1-for-4 reverse
E) 1-for-5 reverse

Question 59

You own 600 shares of stock in Avondale Corporation. The company plans to pay a dividend of $2.48 per share in one year and a final liquidating dividend of $20.10 per share two years from now. The required return on Avondale stock is 16.3 percent. What will your dividend income be this year if you use homemade dividends to create two equal annual dividend payments?

A) $6,270
B) $6,712
C) $5,667
D) $6,376
E) $6,400

Question 60

A small stock dividend:

A) increases the common stock account by the market price of each share issued.
B) reduces cash by the total market value of the issued shares.
C) affects the par value per share but not the equity account balances.
D) reduces retained earnings by the market price of each share issued.
E) does not affect the capital in excess of par value account.

Question 61

Kurt's Market has 16,000 shares of stock outstanding with a par value of $1 per share and a market value of $17 per share. The balance sheet shows $16,000 in the common stock account, $236,000 in the capital in excess of par account, and $314,800 in the retained earnings account. The firm just announced a stock dividend of 65 percent. What will be the balance in the retained earnings account after this dividend?

A) $304,400
B) $316,800
C) $314,800
D) $308,600
E) $325,200

Question 62

Ma's Fried Chicken has 21,000 shares of stock outstanding with a par value of $1 per share and a market value of $41 per share. The balance sheet shows $121,000 in the capital in excess of par account and $204,000 in the retained earnings account. The firm just announced a 5 percent stock dividend. What will be the total owners' equity after the dividend?

A) $354,000
B) $298,000
C) $346,000
D) $321,000
E) $325,000

Question 63

Josh's Inc. has 4,800 shares of stock outstanding with a par value of $1 per share and a market value of $19 a share. The balance sheet shows $149,000 in the capital in excess of par account, $4,800 in the common stock account, and $192,800 in the retained earnings account. The firm just announced a stock dividend of 10 percent. What is the value of the capital in excess of par account after the dividend?

A) $161,300
B) $149,000
C) $152,280
D) $157,640
E) $164,400

Question 64

Built Rite Corp. is evaluating an extra dividend versus a share repurchase. In either case, $7,500 would be spent. Current earnings are $1.24 per share, and the stock currently sells for $32 per share. There are 5,000 shares outstanding. Ignore taxes and other imperfections. You own one share of stock in this company. If the company issues the dividend, your total investment will be worth ________ as compared to ________ if the company opts for a share repurchase.

A) $30.50; $30.50
B) $27.50; $32.00
C) $27.50; $30.50
D) $27.50; $27.50
E) $32.00; $32.00

Question 65

Alfonzo's Italian House has 17,000 shares of stock outstanding with a par value of $1 per share and a market price of $24.60 a share. The firm just announced a stock split of three-for-two. What will be the market price per share after the split?

A) $16.40
B) $18.60
C) $28.20
D) $24.60
E) $36.90

Question 66

South Shore Limited has 14,500 shares of stock outstanding with a par value of $1 per share and a market price of $54.10 a share. The firm just announced a stock split of seven-for-two. What will be the par value of the stock after the split?

A) $.29
B) $.58
C) $1.00
D) $7.00
E) $3.50

Question 67

Webster United is paying a dividend of $1.09 per share today. There are 225,000 shares outstanding with a market price of $31.17 per share prior to the dividend payment. Ignore taxes. Before the dividend, the company had earnings per share of $2.11. As a result of this dividend, the:

A) retained earnings will decrease by $225,000.
B) retained earnings will increase by $245,250.
C) total value of the company will not change.
D) earnings per share will increase to $3.20.
E) price-earnings ratio will be 14.26.

Question 68

The market value balance sheet for Cherry Pie Corp. reflects cash of $31,020, fixed assets of $539,750, and equity of $286,800. There are 6,000 shares of stock outstanding with a par value of $1 per share. The company has announced that it is going to repurchase $20,000 of stock. What will the price of the stock be after this repurchase?

A) $47.80
B) $46.60
C) $46.20
D) $47.60
E) $46.80

Question 69

Al owns 250 shares of M&M Enterprises and earns 12.9 percent on his investment. M&M recently stated that it will pay dividends per share of $.69 this year and $.72 next year. Al does not want any dividend income this year but does want as much dividend income as possible next year. Ignoring taxes, what will Al's total homemade dividend be next year?

A) $352.50
B) $366.38
C) $330.50
D) $341.80
E) $374.75

Question 70

TJ's has a market value equal to its book value. Currently, the firm has excess cash of $218,500, other assets of $897,309, and equity of $547,200. The firm has 40,000 shares of stock outstanding and net income of $59,800. Management has decided to spend 15 percent of the excess cash on a share repurchase program. How many shares of stock will be outstanding after the stock repurchase is completed?

A) 47,937
B) 48,050
C) 37,604
D) 35,578
E) 41,584

Question 71

Val's Marina Supply has 7,500 shares of stock outstanding with a par value of $1 per share and a market value of $28 per share. The balance sheet shows $7,500 in the common stock account, $32,400 in the capital in excess of par account, and $81,800 in the retained earnings account. The firm just announced a 100 percent stock dividend. What is the value of the capital in excess of par account after the dividend?

A) $24,900
B) $16,200
C) $32,400
D) $39,900
E) $64,800

Question 72

Della's Pools has 36,000 shares of stock outstanding with a par value of $1 per share and a market price of $38 a share. The company just announced a stock split of four-for-three. How many shares of stock will be outstanding after the split?

A) 27,000
B) 14,400
C) 12,000
D) 36,000
E) 48,000

Question 73

The Tanning Bed has 8,500 shares of stock outstanding with a par value of $1 per share and a market value of $12 per share. The balance sheet shows $34,200 in the capital in excess of par account, and $51,300 in the retained earnings account. The firm just announced a 100 percent stock dividend. What will be the value of the common stock account after the dividend?

A) $8,500
B) $10,000
C) $12,750
D) $15,000
E) $17,000

Question 74

Randall's has 34,000 shares of stock outstanding with a par value of $1 per share. The market value is $23 per share. The balance sheet shows $152,000 in the capital in excess of par account, $34,000 in the common stock account, and $67,500 in the retained earnings account. The firm just announced a 5 percent (small) stock dividend. What will be the balance in the retained earnings account after the dividend?

A) $28,400
B) $29,500
C) $30,500
D) $27,800
E) $32,500

Question 75

Tucker's National Distributing has a current market value of equity of $32,400. Currently, the firm has excess cash of $2,100, total assets of $22,400, net income of $3,210, and 800 shares of stock outstanding. The company is going to use all of its excess cash to repurchase shares of stock. What will the stock price per share be after the stock repurchase is completed?

A) $40.87
B) $39.94
C) $40.06
D) $40.50
E) $39.42

Question 76

Verbal Communications has 18,400 shares of stock outstanding with a par value of $1 per share and a market value of $43 per share. The firm just announced a stock dividend of 100 percent. What is the market value per share after the dividend?

A) $21.50
B) $20.50
C) $27.00
D) $26.50
E) $43.00

Question 77

Delaware Trust has 2,400 shares of common stock outstanding at a market price per share of $63. Currently, the firm has excess cash of $3,500, total assets of $728,900, and net income of $41,320. The firm has decided to pay out all of its excess cash as a cash dividend. What will the earnings per share be after this dividend is paid?

A) $9.69
B) $12.86
C) $17.22
D) $13.07
E) $19.24

Question 78

You own 400 shares of stock in A-Z Tours. The company plans to pay a dividend of $.65 in Year 1 and a final liquidating dividend of $28.50 per share in Year 2. The required return is 15.6 percent. If you only want $200 total in dividends in the first year, what will be your homemade dividend in the second year?

A) $12,696
B) $10,764
C) $11,469
D) $11,402
E) $12,878

Question 79

Water Mills has a market value equal to its book value. Currently, the company has excess cash of $1,368, other assets of $35,807, and equity valued at $23,750. There are 2,500 shares of stock outstanding and net income is $470. What will the new earnings per share be if the firm uses 25 percent of its excess cash to complete a stock repurchase?

A) $.19
B) $.33
C) $.26
D) $.08
E) $.13

Question 80

The equity of Blooming Roses has a total market value of $148,900. Currently, the firm has excess cash of $4,200 and net income of $21,400. There are 1,100 shares of stock outstanding. What will be the percentage change in the stock price per share if the company pays out all of its excess cash as a cash dividend?

A) −3.14 percent
B) −2.82 percent
C) −2.75 percent
D) −3.08 percent
E) 0 percent