Unlock document.
This document is partially blurred.
Unlock all pages and 1 million more documents.
Get Access
1. A dividend does
not
accompany stocks that are purchased on the ex-dividend date.
2. Anyone holding a stock before its ex-dividend date is entitled to the dividend.
3. Companies can pay out cash to their shareholders in two ways. They can pay a dividend or
they can buy back some of their outstanding shares.
4. For the period 2003 to 2012, more than half of U.S. corporations did not pay a dividend nor
did they repurchase shares.
5. The stock repurchase champion is ExxonMobil, which has repurchased more than $191
billion of its shares during the period 2005-2012.
6. In a three-for-two stock split, each investor would receive one additional share for each
two shares already held.
7. A two-for-one stock split is like a 200% stock dividend.
8. Stock splits do not affect the company's assets, total value, or share price.
9. A 100% stock dividend results in a doubling of the number of outstanding shares, but it
does not affect the company's assets, profits, or total value.
10. More often than not, the announcement of a stock split does result in a rise in the market
price of the stock.
11. Investors often interpret a stock split announcement as a signal of management's
confidence in the future.
12. Investors forego the right to the upcoming dividend if they purchase on or after the ex-
dividend date.
13. A stock split will affect the stock's price, while a stock dividend will not.
14. A 50% stock dividend is the same as a 2-for-1 stock split.
15. The share price declines when a stock repurchase occurs.
16. Dividends are likely to shift up and down as earnings fluctuate so that managers can
maintain a stable payout ratio.
17. Corporate dividends are less volatile than corporate earnings.
18. MM's dividend irrelevance proposition is based on an efficient market system with no
taxes or issue costs.
19. According to the MM dividend irrelevance proposition, since investors do not need
dividends to convert their shares to cash, they will not pay higher prices for firms with higher
dividend payouts.
20. Dividend policy may be defined as the trade-off between retaining earnings on the one
hand and paying out cash and issuing shares on the other.
21. The information content of dividends says that dividend increases send good news about
cash flow and earnings, while dividend cuts send bad news.
22. Under current tax law, the longer an investor waits to sell an inflated stock, the lower is
the present value of the tax liability.
23. Firms can increase their stock price by increasing their dividends to a level that appeals to
the clientele group that prefers high-dividend stocks.
24. A dividend will be paid to shareholders on Friday, May 9. To receive this dividend you
must purchase the stock no later than:
25. You currently own 200 shares of stock valued at $6 per share. If the firm declares a 1-for-
4 reverse stock dividend you will own ____ shares valued at ___ per share.
26. A stock goes ex-dividend:
27. What would you expect to happen to the price of a share of stock on the day it goes ex-
dividend if you ignore taxes? The price should:
28. Which one of these is generally a repurchase of shares from a single shareholder?
29. Boards of directors may be legally restricted in their declaration of dividends if:
30. ABC Corp. stock is selling for $30 per share when a 10% stock dividend is declared. If you
own 100 shares of ABC Corp. then you will receive:
31. XYZ Corp. has 1,000 shares outstanding and retained earnings of $25,000. Theoretically,
what would you expect to happen to the price of their stock, currently selling for $30 per share, if
a 25% stock dividend is declared?
32. A stock is currently selling for $40 a share. If the firm declares a 3-for-2 stock dividend
there will be:
33. An investor owns 5,000 shares, which is 1% of a corporation's outstanding stock before a
stock repurchase. The investor did not sell any of his stock during the 25,000 share repurchase.
Which one of the following statements is correct?
34. Which one of these statements is correct?
35. Stock repurchases are most commonly interpreted by investors as a signal that:
36. A firm has current assets of $1.2 million, fixed assets of $3.6 million, and debt of $2.2
million. There are 250,000 shares of stock outstanding. What will be the book value of equity if
the firm repurchases 10% of its outstanding shares for $10.40 a share?
37. A policy of dividend "smoothing" refers to:
38. How are investors most apt to interpret a reduction in a firm's regular dividend payment?
39. What is the new share price for a corporation with a current share price of $4 that
employs a 2-for-9 reverse split?
40. If investors are expecting a dividend cut, then the announcement of the decreased
dividend payment will:
41. MM's proposition of dividend irrelevance depends upon:
42. A firm has $250,000 to spend on either a one-time special dividend or on a share
repurchase program. If the share repurchase is selected, then the firm's:
43. Based on the dividend growth model, the price of a stock will remain constant if the
dividend is cut, provided that the:
44. Why are dividend changes rather than the absolute level of dividends perceived to be
more important to managers and shareholders?
