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94.
The balance sheet for Apple Pie Corp. is shown here in market value terms.
There are 5,000 shares of stock outstanding.
The company has declared a dividend of $1.80 per share. The stock goes
ex-dividend tomorrow. Ignore any tax effects. What will the price of the
stock be tomorrow?
95.
The balance sheet for Apple Pie Corp. is shown here in market value terms.
There are 5,000 shares of stock outstanding.
The company has announced that it is going to repurchase $4,350 worth of
stock. What will the price of the stock be after this repurchase?
96.
The market value balance sheet for Inbox Manufacturing is shown here.
Inbox has declared a 15 percent stock dividend. The stock goes ex-dividend
tomorrow (the chronology for a stock dividend is similar to that for a cash
dividend). There are 13,000 shares outstanding. What is the ex-dividend
stock price?
97.
You own 1,000 shares of stock in Avondale Corporation. You will receive an
80-cent per share dividend in one year. In two years, Avondale will pay a
liquidating dividend of $40 per share. The required return on Avondale stock
is 14 percent. What will your dividend income be this year if you use
homemade dividends to create two equal annual dividend payments?
98.
You own 1,500 shares of stock in Avondale Corporation. You will receive a
$0.80 per share dividend in one year. In two years, Avondale will pay a
liquidating dividend of $35 per share. The required return on Avondale stock
is 16 percent. You only want $200 total in dividends in year one and
accomplish this by using homemade dividends. What will your total dividend
amount be in year two?
99.
Built Rite Corp. is evaluating an extra dividend versus a share repurchase. In
either case, $5,500 would be spent. Current earnings are $0.80 per share,
and the stock currently sells for $33 per share. There are 250 shares
outstanding. Ignore taxes and other imperfections. You own one share of
stock in this company. If the company issues the dividend, your total
investment will be worth ____ as compared to ____ if the company opts for a
share repurchase.
Essay Questions
100.
You are the CFO of a non-dividend paying firm that currently has excess
cash reserves. You are preparing for an internal management meeting
where dividends are on the agenda. You know that the CEO favors the
commencement of a dividend program. You, however, oppose any dividend
plan at this time. Write a good argument that you can use in the meeting to
support your position.
101.
Explain the meaning of the dividend clientele effect and why it is important.
102.
Stock repurchase programs appear to becoming more popular with business
firms. Explain the appeal of these programs as compared to that of cash
dividend programs from the stock issuer's point of view.
103.
Identify some real-world factors which might make it more difficult for an
individual to effectively create a homemade dividend policy.
104.
Explain how cash dividends affect individual shareholders differently than
an equal amount of funds spent on a repurchase.
