B) False
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B) False
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A) $114.0 $73.3 $333.9
B) $120.0 $77.2 $351.5
C) $126.4 $81.2 $370.0
D) $133.0 $85.5 $389.5
E) $140.0 $90.0 $410.0
G) A) and B)
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A) After a 3-for-1 stock split,a company's price per share should fall,but the number of shares outstanding will rise.
B) Investors can interpret a stock repurchase program as a signal that the firm's managers believe the stock is undervalued.
C) Companies can repurchase shares to distribute large inflows of cash,say from the sale of a division,to stockholders without paying cash dividends.
D) Stockholders pay no income tax on dividends if the dividends are used to purchase stock through a dividend reinvestment plan.
E) Stock repurchases can be used by a firm as part of a plan to change its capital structure.
G) C) and E)
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A) One advantage of dividend reinvestment plans is that they enable investors to postpone paying taxes on the dividends credited to their account.
B) Stock repurchases can be used by a firm that wants to increase its debt ratio.
C) Stock repurchases make sense if a company expects to have a lot of profitable new projects to fund over the next few years,provided investors are aware of these investment opportunities.
D) One advantage of an open market dividend reinvestment plan is that it provides new equity capital and increases the shares outstanding.
E) One disadvantage of dividend reinvestment plans is that they increase transactions costs for investors who want to increase their ownership in the company.
G) D) and E)
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B) False
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A) You will have 200 shares of stock,and the stock will trade at or near $60 a share.
B) You will have 100 shares of stock,and the stock will trade at or near $60 a share.
C) You will have 50 shares of stock,and the stock will trade at or near $120 a share.
D) You will have 50 shares of stock,and the stock will trade at or near $60 a share.
E) You will have 200 shares of stock,and the stock will trade at or near $120 a share.
G) C) and D)
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A) $240,000
B) $228,000
C) $216,600
D) $205,770
E) $0
G) A) and E)
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A) $6.32
B) $6.65
C) $7.00
D) $7.35
E) $7.72
G) A) and B)
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A) $100,000
B) $200,000
C) $300,000
D) $400,000
E) $500,000
G) All of the above
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B) False
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A) 6.65
B) 6.98
C) 7.00
D) 7.35
E) 7.72
G) B) and D)
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A) the dividend payout ratio is increasing.
B) no dividends were paid during the year.
C) the dividend payout ratio is decreasing.
D) the dollar amount of investments has decreased.
E) the dividend payout ratio has remained constant.
G) B) and C)
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A) $100,000
B) $200,000
C) $300,000
D) $400,000
E) $500,000
G) D) and E)
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B) False
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A) no dividends to common stockholders.
B) dividends only out of funds raised by the sale of new common stock.
C) dividends only out of funds raised by borrowing money (i.e. ,issue debt) .
D) dividends only out of funds raised by selling off fixed assets.
E) no dividends except out of past retained earnings.
G) A) and C)
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A) $205,000
B) $500,000
C) $950,000
D) $2,550,000
E) $3,050,000
G) B) and C)
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A) Firm M probably has a higher dividend payout ratio than Firm N.
B) If the corporate tax rate increases,the debt ratio of both firms is likely to decline.
C) The two firms are equally likely to pay high dividends.
D) Firm N is likely to have a clientele of shareholders who want to receive consistent,stable dividend income.
E) Firm M probably has a lower debt ratio than Firm N.
G) B) and D)
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A) The clientele effect can explain why so many firms change their dividend policies so often.
B) One advantage of adopting the residual dividend policy is that this policy makes it easier for corporations to develop a specific and well-identified dividend clientele.
C) New-stock dividend reinvestment plans are similar to stock dividends because they both increase the number of shares outstanding but don't change the firm's total amount of book equity.
D) Investors who receive stock dividends must pay taxes on the value of the new shares in the year the stock dividends are received.
E) If a firm follows the residual dividend policy,then a sudden increase in the number of profitable projects is likely to reduce the firm's dividend payout.
G) B) and E)
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A) Capital gains earned in a share repurchase are taxed less favorably than dividends;this explains why companies typically pay dividends and avoid share repurchases.
B) Very often,a company's stock price will rise when it announces that it plans to commence a share repurchase program.Such an announcement could lead to a stock price decline,but this does not normally happen.
C) Stock repurchases increase the number of outstanding shares.
D) The clientele effect is the best explanation for why companies tend to vary their dividend payments from quarter to quarter.
E) If a company has a 2-for-1 stock split,its stock price should roughly double.
G) A) and B)
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