公司理财精要第十四章题库

Chapter 14 Dividends and Dividend Policy 14 1 Chapter 14 Dividends and Dividend Policy Multiple Choice Questions 1 Which one of the following is a payment of either cash or shares of stock that is paid out of earnings to a firm s shareholders A Interest B Distribution C Retained earnings D Dividend E Stock repurchase 2 Which one of the following is a payment by a firm to its shareholders from any source other than current or accumulated retained earnings A Interest B Distribution C Retained earnings D Dividend E Stock repurchase 3 Which one of the following best defines a regular cash dividend A Distribution by a firm to its shareholders B Payment from any source by a firm to its owners C One time payment of cash by a firm to its shareholders D Cash payment by a firm to its owners as part of a firm s normal operations E Distribution of the proceeds from the sale of a portion of a firm s operations 4 Which one of the following is the date on which the board of directors agrees to pay a dividend and passes a resolution to do so A Date of record B Ex dividend date C Payment date D Declaration date E Public announcement date Chapter 14 Dividends and Dividend Policy 14 2 5 The ex dividend date is defined as day s before the date of record A three business B three C two business D two E one 6 On which one of the following dates is the determination made as to which shareholders will receive a dividend payment A Date of record B Ex dividend date C Payment date D Declaration date E Public announcement date 7 On which one of the following dates are dividend checks mailed A Date of record B Ex dividend date C Payment date D Declaration date E Public announcement date 8 The clientele effect states that investors fall into various groups because of differences in their preferences for which one of the following A Share price levels B Risk level C Short term versus long term investments D Rates of return E Dividends Chapter 14 Dividends and Dividend Policy 14 3 9 This morning Lambert Materials bought 10 000 of its outstanding shares in the open market What type of transaction was this A Stock payout B Stock distribution C Stock dividend D Stock repurchase E Stock reversal 10 Which one of the following is a non cash payment made by a firm to its shareholders and is a payment that lessens the value of each outstanding share A Reverse stock split B Cash distribution C Stock dividend D Regular dividend E Liquidating dividend 11 Which one of the following increases the number of shares outstanding but does not increase the value of owner s equity A Stock repurchase B Reverse stock split C Stock split D Cash distribution E Liquidating dividend 12 During the past year ABC stock has sold for as little as 19 a share and a much as 33 a share Which one of the following terms applies to these prices A Benchmark values B Price splits C Price dividers D Split range E Trading range Chapter 14 Dividends and Dividend Policy 14 4 13 Which one of the following reduces the number of shares outstanding but does not change a firm s total equity A Stock split B Distribution C Reverse split D Liquidation E Redemption 14 Lester s Dry Goods paid 1 10 per share in dividends last year The company currently has excess cash and would like to distribute 0 40 a share to its shareholders However the company is concerned about increasing the dividend by that amount as it will not be able to afford any increase in the future and doesn t want to lower the dividend once it has been raised Which one of the following is probably the best suggestion for distributing the 0 40 per share A Special dividend of 0 40 per share B Extra cash dividend of 0 40 per share C Liquidating dividend of 0 40 per share D Increase the regular dividend by 0 11 and pay a special dividend of 0 29 E Increase the regular dividend by 0 11 and pay an extra cash dividend of 0 29 15 Downtown Merchants has paid a quarterly dividend of 0 60 per share for the past two years This quarter the firm plans to pay 0 60 plus an additional 0 05 The firm has stated that it uncertain whether it will pay 0 60 or 0 65 per share next quarter Which one of the following is the best description of the additional 0 05 that is being paid this quarter A Liquidating dividend B Special dividend C Extra dividend D Stock dividend E Normal dividend Chapter 14 Dividends and Dividend Policy 14 5 16 Which one of the following is an example of a liquidating dividend A Valley Feed Mills recently sold its grain storage facility and is distributing the proceeds of that sale to its shareholders B Kate s Winery has excess cash that it wishes to distribute to its shareholders in addition to its normal cash dividend This extra distribution usually occurs about once every year C Kurt s Music is planning to increase its quarterly dividend by three percent D The Dried Florist is preparing to pay its first annual dividend of 0 08 per share E Hi Tek had an extraordinarily profitable year and has decided to do a one time only 10 per share cash dividend 17 Which one of the following events must occur before a firm can offer a liquidating dividend A Bankruptcy filing B Insolvency declaration C Asset sale D Negative equity E Failed bond issue 18 Kelsey International declared a dividend on Friday November 13 that is payable on Friday December 4 to holders of record on Monday November 30 What is the latest date that you can purchase this stock if you wish to receive this dividend Assume there are no banking holidays within this period of time A Tuesday November 24 B Wednesday November 25 C Thursday November 26 D Friday November 27 E Monday November 30 19 Which one of the following dates is the date on which the board of directors votes to pay a dividend A Record date B Declaration date C Ex dividend date D Payment date E Settlement date Chapter 14 Dividends and Dividend Policy 14 6 20 Tuesday December 1 is the ex dividend date for Alpha stock Which one of the following dates is the record date Assume there are no banking holidays to consider A Friday November 27 B Monday November 30 C Wednesday December 2 D Thursday December 3 E Friday December 4 21 Chelsie Enterprises declared a dividend to shareholders of record on Monday February 8 that is payable on Friday February 26 Carla knows that her dividend check normally arrives three business days after the check is written On which one of the following days should she expect to receive her dividend check A Wednesday February 10 B Thursday February 11 C Monday March 1 D Tuesday March 2 E Wednesday March 3 22 Davidson Interiors declared a dividend to holders of record on Thursday October 15 that is payable on Monday November 2 Suenette purchased 200 shares of Davidson Interiors stock on Monday October 12 and Jake purchased 100 shares of this stock on the following day Which one of the following statements is correct given this information A Both Suenette and Jake will receive this dividend B Suenette will receive the dividend but Jake will not C Jake will receive the dividend but Suenette will not D Neither Suenette nor Jake will receive this dividend E You cannot determine who will or will not receive this dividend based on the information provided Chapter 14 Dividends and Dividend Policy 14 7 23 Twelve days ago DOG Inc declared a dividend of 1 34 a share The ex dividend date is tomorrow All else constant which one of the following is the best estimate of DOG Inc s opening stock price tomorrow A 1 34 lower than today s closing price B today s closing price minus an amount approximately equal to the aftertax value of the dividend C the same as today s closing price since the dividend is expected D 1 34 higher than today s closing price E today s closing price plus an amount approximately equal to the aftertax value of the dividend 24 Which one of the following statements is correct A Dividends are irrelevant B Flotation costs are a good reason to support a high dividend payout C Current tax laws favor high current dividends for individual investors D Dividend policy is the time pattern of dividend payout E Corporate investors tend to prefer low dividend payouts on securities they own 25 Which one of the following is an argument that dividend policy is irrelevant A Flotation costs as they apply to equities B Tax laws as they currently exist C An unsatisfied demand for high dividend paying stocks D Current equilibrium in the clientele dividend market E The current tax exclusion available to corporate investors 26 Which one of the following statements is correct concerning the taxation of dividends and capital gains A Seventy percent of capital gains derived from stock investments are tax exempt for corporate investors B Dividends are a form of tax exempt income for individual investors C All investors are subject to the same tax rate on dividend income D Individual investors can defer taxation on both dividends and capital gains E As of 2003 individual investors pay a 15 percent tax on both dividends and capital gains Chapter 14 Dividends and Dividend Policy 14 8 27 Which one of the following would tend to favor a low dividend payout A Higher tax rates on capital gains than on dividend income B High flotation cost for equity issues C Endowment fund investors who cannot spend principal D Investors desire for a high dividend yield E Elimination of the tax deferral on capital gains 28 Which two of the following tend to limit the amount of dividends that can be paid by a leveraged corporation I current tax laws II corporate tax exclusion III bond indenture covenant IV state laws pertaining to retained earnings 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 29 As of 2003 the maximum tax rate on long term capital gains for high income individuals was which one of the following rates A 10 percent B 15 percent C 20 percent D 35 percent E 39 percent 30 Which one of the following factors favors a high dividend payout A Low transaction costs on stock trades B Lower taxes on capital gains than on dividends C Tax deferment on capital gains but not on dividend income D Flotation costs E Corporate shareholders Chapter 14 Dividends and Dividend Policy 14 9 31 What percent of capital gains are excluded from taxation for corporate shareholders A 0 percent B 10 percent C 25 percent D 70 percent E 75 percent 32 Phil is reviewing ABC Company s dividend policy as it relates to the firm s shareholders As part of this review he wants to divide shareholders into two basic categories in respect to dividend payments The first group will be shareholders who are taxed on dividend income and the second group will be shareholders who receive some form of tax break on dividend income Which of the following types of shareholders should be placed in the tax favored second group I corporate II pension fund III individuals IV trust funds A I only B III only C I and III only D II and IV only E I II and IV only 33 Assume that clienteles exist Given this assumption which one of the following statements is correct A A firm can increase its share price by increasing its dividend payout B Dividend policy is irrelevant as long as each clientele group is currently satisfied C All firms will adopt a high dividend payout policy D All dividends become irrelevant E All firms should adopt a low dividend payout policy Chapter 14 Dividends and Dividend Policy 14 10 34 Martin 15 45 B 360 18 70 C 440 15 45 D 440 17 00 E 440 18 70 74 Plato United has 17 000 shares of stock outstanding at a price per share of 33 How many shares will be outstanding if the firm does a 5 for 4 stock split A 13 600 shares B 15 800 shares C 17 000 shares D 19 600 shares E 21 250 shares 75 Mueller Brothers has 38 000 shares of stock outstanding at a price per share of 59 How many shares will be outstanding if the firm does a 3 for 2 stock split A 24 000 shares B 25 333 shares C 55 667 shares D 57 000 shares E 61 000 shares 76 Lester s Meat Market has 7 000 shares of stock outstanding at a price per share of 11 What will the price per share be if the firm declares a 3 for 5 reverse stock split A 6 60 B 7 50 C 11 00 D 15 00 E 18 33 Chapter 14 Dividends and Dividend Policy 14 23 77 Theodore s has common stock outstanding at a price of 26 a share The total market value of the equity is 429 000 How many shares of stock will be outstanding if the firm does a 2 for 5 reverse stock split A 41 250 shares B 36 000 shares C 6 600 shares D 7 500 shares E 16 500 shares 78 Jerri currently owns 200 shares of Alpha stock Each share is currently worth 36 What will Jerri s investment in Alpha be worth if the company declares a 4 for 3 stock dividend A 5 400 B 7 200 C 9 000 D 21 600 E 28 800 79 Taylor s Inc stock has plummeted in value and is currently priced at 4 a share The exchange on which the stock trades requires that the minimum stock price be 10 a share Taylor s has decided to do a reverse stock split to avoid delisting However when it does this the firm wants the stock price increased to at least twice the minimum exchange required price Which one of the following stock split ratios is most appropriate for this situation A 1 for 3 B 1 for 5 C 2 for 9 D 3 for 1 E 5 for 1 80 Stellar Technologies has 48 000 shares of stock outstanding at a market price of 6 a share Which one of the following stock splits should the firm declare if it wants to increase the stock price to exactly 20 a share Ignore any taxes or market imperfections A 10 for 3 stock split B 3 for 1 stock split C 1 for 3 reverse stock split D 2 for 7 reverse stock split E 3 for 10 reverse stock split Chapter 14 Dividends and Dividend Policy 14 24 81 Kaylor s Tool Shoppe has 16 000 shares of stock outstanding at a market price of 2 a share Which one of the following stock splits should the firm declare if it wants to increase the stock price to exactly 15 a share Ignore any taxes or market imperfections A 15 for 2 stock split B 8 for 1 stock split C 1 for 7 reverse stock stock split D 2 for 15 reverse stock split E 1 for 8 reverse stock split Essay Questions 82 What are the differences between a regular cash dividend a liquidating dividend a special dividend and an extra cash dividend 83 You are having a discussion with one of your classmates on dividend policy Your classmate states that dividend policy is totally irrelevant Write a response to this statement justifying that in the real world dividend policy does matter Chapter 14 Dividends and Dividend Policy 14 25 84 Explain why a firm might prefer a stock repurchase rather than an increase in the firm s regular dividend 85 What is the difference between a tender offer and a targeted repurchase 86 Explain how the process of dividend smoothing affects the dividend growth rate as compared to the earnings growth rate Chapter 14 Dividends and Dividend Policy 14 26 87 Your portfolio is 240 shares of Rising Sun Co The stock currently sells for 62 a share The company has announced a dividend of 1 10 per share with an ex dividend date of May 6 Assume there are no taxes What will your portfolio value be on May 7 A 14 616 B 14 880 C 15 026 D 15 144 E 15 210 88 Tattler Inc has declared a 4 60 per share dividend Suppose capital gains are not taxed but dividends are taxed at 20 percent New IRS regulations require that taxes be withheld at the time the dividend is paid Tattler sells for 87 per share and the stock is about to go ex dividend What do you think the ex dividend price will be A 82 40 B 83 32 C 85 08 D 86 67 E 87 00 Chapter 14 Dividends and Dividend Policy 14 27 89 The owners equity accounts for Boats and More are shown here Assume Boats and More stock currently sells for 38 per share and a 10 percent stock dividend is declared What will be the new common stock account value A 40 909 B 45 000 C 47 000 D 48 511 E 49 500 90 The owners equity accounts for Speed Boats are shown here How many shares will be outstanding if the firm declares a one for six reverse stock split A 5 833 shares B 9 167 shares C 18 000 shares D 35 000 shares E 330 000 shares Chapter 14 Dividends and Dividend Policy 14 28 91 LOG Inc currently has 300 000 shares of stock outstanding that sell for 73 per share Assuming no market imperfections or tax effects exist what will the share price be after LOG has a five for three stock split A 43 80 B 45 60 C 73 00 D 109 18 E 121 67 92 The balance sheet for Quik Treats Inc is shown here in market value terms There are 20 000 shares of stock outstanding The company has declared a dividend of 1 40 per share The stock goes ex dividend tomorrow Ignore any tax effects What will the firm s equity value be after the dividend is paid A 572 000 B 587 000 C 603 000 D 615 000 E 643 000 Chapter 14 Dividends and Dividend Policy 14 29 93 The balance sheet for Oasis Inc is shown here in market value terms There are 30 000 shares of stock outstanding The company has announced it is going to repurchase 40 000 worth of stock What will the price per share be after the repurchase A 36 29 B 38 17 C 38 67 D 39 42 E 39 89 94 Flemington Farms is evaluating an extra dividend versus a share repurchase In either case 15 000 would be spent Current earnings are 2 80 per share and the stock currently sells for 75 per share There are 2 800 shares outstanding Ignore taxes and other imperfections The PE ratio will be if the firm issues the dividend as compared to if the firm does the share repurchase A 24 87 24 87 B 24 87 26 79 C 26 79 24 87 D 26 79 26 79 E 26 79 27 13 Chapter 14 Dividends and Dividend Policy 14 30 Chapter 14 Dividends and Dividend Policy Answer Key Multiple Choice Questions 1 Which one of the following is a payment of either cash or shares of stock that is paid out of earnings to a firm s shareholders A Interest B Distribution C Retained earnings D Dividend E Stock repurchase Refer to section 14 1 Bloom s Knowledge Difficulty Basic Learning Objective 14 01 Discuss dividend types and how dividends are paid Section 14 1 Topic Dividend 2 Which one of the following is a payment by a firm