81.
Which of the following statements is incorrect?
82.
Brady inherited 1,000 shares of LNM, Inc. The stock is selling in the market for $177 per
share and the company is contemplating a 2–for-6 stock split. Given this information,
which of the following statements is correct?
83.
Brady inherited 500 shares of LNM, Inc. The stock is selling in the market for $92 per
share and the company is contemplating a 5-for–3 stock split. Given this information,
which of the following statements is correct?
84.
Brady inherited 1,750 shares of LNM, Inc. The stock is selling in the market for $82 per
share and the company is contemplating a 1-for–3 stock split. Given this information,
which of the following statements is correct?
85.
In 2004, Microsoft paid one of the largest extraordinary dividends in history. All of the
following contributed to this historical event EXCEPT:
86.
The first day that the shares will trade without the dividend attached is referred to as the:
87.
On the _____________, the firm will look on its books to find the registered owners so that
they can start addressing payments.
88.
The board of directors announces its intention to pay a dividend on the:
89.
Which of the following statements is correct?
90.
The theory that argues that dividends that the firm has committed to pay are less risky to
risk-averse investors than are potential future capital gains is referred to as:
91.
The bird-in-the-hand fallacy refers to:
92.
Which of the following is correct?
93.
Why might a firm’s investors wish to delay receiving cash from the firm?
94.
Why might a firm announce a “reverse stock dividend”?
95.
Which of the following would cause dividends to decrease if the firm was using the
residual dividend model?
96.
Which of the following would cause dividends to decrease if the firm was using the
residual dividend model?
97.
Which of the following would cause dividends to decrease if the firm was using the
residual dividend model?
98.
Which of the following would cause dividends to increase if the firm was using the residual
dividend model?
Essay Questions
99.
Why might a firm announce a reverse stock split?
100.
What would prompt a firm like GE to start paying out a much higher percentage of its
earnings as dividends?
101.
What type of clientele would you expect to prefer dividends over capital gains? Why?
102.
Explain the residual dividend model.
103.
When might raising a firm’s dividend payout ratio be viewed as a negative signal?
104.
The Modigliani and Miller’s Dividend Irrelevance Theorem is set in a “perfect world.” List
the four elements that are features of their “perfect world.”
105.
Show mathematically that, with a tax rate on both dividends and capital gains of 10
percent, it doesn’t matter whether earnings are paid out as dividends or kept in the firm to
cause g to grow for a constant-dividend stock.
106.
Everything else held constant, if a firm announces that it will double the length of time
between its ex-dividend date and its payment date, what should be the effect on stock
price?
107.
List and define the definitive set of four dates associated with a firm paying out a
dividend.
108.
Explain Gordon and Lintner’s bird–in-the-hand theory.
109.
Identify factors that affect a firm’s payout policies.
110.
Note the advantages and disadvantages of a firm’s stock repurchases.
111.
Analyze a firm’s decision to distribute constant ordinary dividends or extraordinary
dividends.