HJ Corporation has excess cash and has opted to buy some of its shares of outstanding common stock.. All else equal, the market value of a stock will tend to decrease by roughly the afte
Trang 1Student: _
1 Green Roof Motels has more cash on hand than its operations require Thus, the firm has decided to pay out some of its earnings in the form of cash to its shareholders What are these payments to shareholders called?
E extra cash dividend
4 The board of directors of Wilson Sporting Equipment met this afternoon and passed a resolution to pay a cash dividend of $0.42 a share next month In relation to this dividend, today is referred to as which one
of the following dates?
Trang 27 Dividend payments are mailed on which one of the following dates?
E homemade dividend policy
9 What is the information content effect?
A any type of new information that causes a firm 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 firm's dividend
10 The common stock of Pierson Enterprises has historically had a high dividend yield and is expected
to continue to do so As a result, the majority of its shareholders are individuals and entities that are seeking a regular source of cash income Most of these shareholders pay either no taxes or a relatively low amount of taxes The fact that most of these shareholders have similar characteristics is referred to by which one of the following terms?
A information content effect
B clientele effect
C efficient markets hypothesis
D distribution effect
E market reaction effect
11 HJ Corporation has excess cash and has opted to buy some of its shares of outstanding common stock What is this process of buying called?
E reverse stock split
13 Which one of the following does not affect the total equity of a firm but does increase the number of shares outstanding?
Trang 314 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:
15 A reverse stock split is defined as:
A an increase in the number of shares outstanding that does not affect owners' equity
B a firm buying back existing shares of its stock on the open market
C a firm selling new shares of stock on the open market
D a decrease in the number of shares outstanding that does not affect owner's equity
E a decrease in both the number of shares outstanding and the price per share
16 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 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
17 Billingsley United declared a $0.20 a share dividend 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?
18 Taylor's Tools declared a $0.48 a share dividend on Friday, March 7 The dividend will be paid on
Monday, April 7 The ex-dividend date is Tuesday, March 18 What is the record date?
20 Kate purchased 500 shares of Fast Deliveries stock on Wednesday, July 7th Ted purchased 100 shares
of Fast Deliveries stock on Thursday, July 8th Fast Deliveries declared a dividend on June 20th to
shareholders of record on July 12th and payable on August 1st Which one of the following statements concerning the dividend paid on August 1st 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
Trang 421 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
22 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 firm should ever pay a dividend
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 firm's dividend policy decisions
E Whether or not a firm ever pays a dividend is irrelevant to equity valuation
23 Automatic dividend reinvestment plans:
I require that stockholders reinvest all of the dividends to which they are entitled
II sometimes grant shareholders the privilege of purchasing additional shares at a discounted price.III help shareholders create their own homemade dividend policies
IV help make corporate dividend policies irrelevant to individual stockholders
A II only
B III only
C II and III only
D II, III, and IV only
E I, II, III, and IV
24 Which of the following tends to increase the ability of a shareholder to create his or her own homemade dividend policy?
I low taxes on capital gains
II dividend reinvestment plans
III large holdings of shares
IV low cost equity purchases
A II only
B II and III only
C I, II, and III only
D II, III, and IV only
E I, II, III, and IV
25 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 has a low relevant tax rate
D a majority of the shareholders has better investment opportunities with similar risks
E corporate tax rates exceed personal tax rates
26 The fact that flotation costs can be significant is an argument for:
A a firm to issue larger dividends than its closest competitors
B a firm to maintain a constant dividend policy even if it frequently has to issue new
C shares
D maintaining a constant dividend policy even when profits decline significantly
E maintaining a high dividend policy
F maintaining a low dividend policy and rarely issuing extra dividends
Trang 527 Which of the following tend to keep dividends low?
I shareholders desiring current income
II terms contained in bond indenture agreements
III the desire to maintain constant dividends over time
IV flotation costs
A II and III only
B I and IV only
C II, III, and IV only
D I, II, and III only
E I, II, III, and IV
28 Which of the following shareholders tend to favor a high dividend policy?
I retired individuals
II endowment funds
III corporate investors
IV investors with high dividend tax rates but low capital gains tax rates
A I and III only
B II and IV only
C I, II, and III only
D II, III, and IV only
E I, II, III, and IV
29 An investor is more likely to prefer a high dividend payout if a firm:
A has high flotation costs
B has few, if any, positive net present value projects
C has lower tax rates than the investor
D has a stock price that is increasing rapidly
E offers substantial gains on its equities, which are taxed at a favorable rate
30 The information content of a dividend increase generally signals that:
A the firm has a one-time surplus of cash
B the firm has few, if any, net present value projects to pursue
C management believes earnings growth will be strong going forward
D the firm has more cash than it needs due to a decline in future orders
E dividends thereafter will be lower
31 S.L Moffatt, Inc has paid a quarterly dividend of $1.20 per share for the last ten quarters Which one of the following is most apt to cause the firm 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 firm's outlook for the next few years
D.major lump sum cash outflow next month to settle a class action product liability lawsuit on a product that is no longer produced
E decrease in the number of new projects under consideration as compared to last year
32 The dividend market is in equilibrium when:
A all firms adopt a low dividend policy
B half of the firms 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
Trang 633 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
34 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 twenty years
B A stock repurchase can be used as a means for incumbent officers to retain control of a firm
C.A tender offer indicates that a firm is willing and able to purchase how ever many shares the current 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
35 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 firm's financial statements
E is essentially the same as a cash dividend program provided there are no taxes or other costs
36 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
37 If you ignore taxes and costs, a stock repurchase will:
I reduce the total assets of a firm
II decrease the earnings per share
III reduce the PE ratio more so than an equivalent stock dividend
IV reduce the total equity of a firm
A I and III only
B I and IV only
C II and IV only
D I, III, and IV only
E II, III, and IV only
38 Steve owns 3,000 shares of NOP, Inc stock which he purchased six years ago at a price of $22 a share Today, these shares are selling for $68 each Assume the current tax laws are such that Steve is subject to
a tax rate of 25 percent on both his dividend income and his capital gains From Steve's point of view, a stock repurchase today: (Ignore costs)
A is equivalent to a cash dividend in all respects
B is more desirable than a cash dividend in respect to taxes
C will result in the same tax liability as an equivalent cash dividend
D is more highly taxed than a cash dividend
E is totally unacceptable to him
Trang 739 Which one of the following statements correctly applies to U.S industrial firms based on the period of
1984 -2004?
A Earnings growth rates tend to lag dividend growth rates
B Dividends tend to fluctuate significantly from quarter to quarter
C The percentage of these firms paying dividends in 2004 was higher than in 1984
D The total amount of dividends paid by these firms was greater in 2004 than in 1984
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 firm's future outlook
E Managers are no longer hesitant to lower dividend payments
41 Which one of the following statements is correct?
A Firms 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 firms
D Tax rates are the key factor in determining a firm's dividend policy
E Stock prices tend to ignore expected changes in dividend payments
42 Which of the following balance sheet accounts are affected by a small stock dividend?
I cash
II common stock
III retained earnings
IV capital in excess of par value
A I and III only
B II and III only
C II and IV only
D II, III, and IV only
E I, II, III, and IV
43 A small stock dividend is defined as a stock dividend of less than _ percent
44 Which one of the following is a result of a small stock dividend?
A increase in retained earnings
B decrease in total owner's equity
C decrease in cash
D decrease in capital in excess of par value
E increase in common stock
Trang 845 Which of the following account balance changes occur as a result of a large stock dividend?
I increase in common stock
II decrease in capital in excess of par
III increase in capital in excess of par
IV decrease in retained earnings
A I and III only
B II and IV only
C I and IV only
D II and III only
E I, III, and IV only
46 Revol-Tech is a technology firm with excellent growth prospects The firm wishes to do something to acknowledge the loyalty of the shareholders but needs all of its available cash to fund the firm's rapid growth The market price of the stock is currently trading at the upper end of its preferred trading range The firm is most apt to consider which one of the following in this situation?
A liquidating dividend
B stock split
C reverse stock split
D small stock dividend
E special cash dividend
47 Which two of the following are the best justifications for a reverse stock split?
I combine a reverse stock split with a stock repurchase to enable a firm to go dark
II increase the respectability of the stock
III avoid delisting
IV reduce transaction costs for shareholders
A I and II only
B I and III only
C II and III only
D II and IV only
E III and IV only
48 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
49 Stock splits can be used to:
A adjust the market price of a stock such that it falls within a preferred trading range
B decrease the excess cash held by a firm thereby lowering agency costs
C increase both the number of shares outstanding and the market price per share
D increase the total equity of a firm
E adjust the debt-equity ratio
50 Which one of the following is a direct result of a 2-for-1 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
Trang 951 Sligo Minerals stock is currently trading at $6 a share The firm believes its primary clientele can afford
to spend between $1,500 and $2,000 to purchase a round lot of 100 shares The firm should consider a:
A reverse stock split
B liquidating dividend
C stock dividend
D stock split
E special dividend
52 A one-for-four reverse stock split will:
A increase the par value by 25 percent
B increase the number of shares outstanding by 400 percent
C increase the market value but not affect the par value per share
D increase a $1 par value to $4
E increase a $1 par value to $5
53 A firm wants to maintain a minimum stock price of $15 a share Due to a recent market downturn, the stock is currently selling for $6 a share The firm should consider a:
A 3-for-1 stock split
B 4-for-1 stock split
C 1-for-3 reverse stock split
D 1-for-4 reverse stock split
E 1-for-5 reverse stock split
54 Plyler Cabinets declared a dividend of $1.20 a share on May 15 to holders of record on Monday, June 1 The dividend is payable on June 15 Sara purchased 500 shares of Plyler Cabinets stock on Friday, May
29 How much dividend income will she receive on June 15 from Plyler Cabinets?
56 On July 7, you purchased 500 shares of Wagoneer, Inc stock for $21 a share On August 1, you sold
200 shares of this stock for $28 a share You sold an additional 100 shares on August 17 at a price of
$25 a share The company declared a $0.95 per share dividend on August 4 to holders of record as of Wednesday, August 15 This dividend is payable on September 1 How much dividend income will you receive on September 1 as a result of your ownership of Wagoneer stock?
Trang 1057 Webster United is paying a $1.10 per share dividend today There are 350,000 shares outstanding with a market price of $23 per share Ignore taxes Before the dividend, the company had earnings per share of
$1.74 As a result of this dividend, the:
A retained earnings will decrease by $350,000
B retained earnings will increase by $385,000
C total firm value will not change
D earnings per share will increase to $2.84
E price-earnings ratio will be 12.59
58 You own 2,200 shares of Deltona Hardware The company has stated that it plans on issuing a dividend
of $0.42 a share at the end of this year and then issuing a final liquidating dividend of $2.90 a share at the end of next year Your required rate of return on this security is 16 percent Ignoring taxes, what is the value of one share of this stock to you today?
60 Jenningston Mills has a market value equal to its book value Currently, the firm has excess cash of
$1,200, other assets of $5,800, and equity valued at $3,750 The firm has 250 shares of stock outstanding and net income of $420 What will the new earnings per share be if the firm uses 25 percent of its excess cash to complete a stock repurchase?
Trang 1163 The equity of Blooming Roses has a total market value of $16,000 Currently, the firm has excess cash of $1,200 and net income of $15,400 There are 750 shares of stock outstanding What will be the percentage change in the stock price per share if the firm pays out all of its excess cash as a cash dividend?
64 Delaware Trust has 450 shares of common stock outstanding at a market price per share of $27
Currently, the firm has excess cash of $400, total assets of $28,900, and net income of $1,320 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?
65 Josh's, Inc has 7,000 shares of stock outstanding with a par value of $1.00 per share and a market value
of $32 a share The balance sheet shows $76,000 in the capital in excess of par account, $7,000 in the common stock account, and $64,800 in the retained earnings account The firm just announced a 10 percent stock dividend What is the value of the capital in excess of par account after the dividend?
in the common stock account, and $50,500 in the retained earnings account The firm just announced
a 5 percent (small) stock dividend What will the balance in the retained earnings account be after the dividend?
Trang 1268 Val's Marina Supply has 3,500 shares of stock outstanding with a par value of $1.00 per share and a market value of $19 per share The balance sheet shows $3,500 in the common stock account, $24,000
in the capital in excess of par account, and $31,400 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?
69 Kurt's Market has 8,000 shares of stock outstanding with a par value of $1 per share and a market value
of $13 per share The balance sheet shows $8,000 in the common stock account, $26,000 in the capital
in excess of par account, and $32,700 in the retained earnings account The firm just announced a 100 percent stock dividend What will be the balance in the retained earnings account after this dividend?
100 percent stock dividend What will be the value of the common stock account after the dividend?