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Exam 14: Dividends and Dividend Policy

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Question 1

Multiple Choice

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Lester's has a market value balance sheet as shown below.The firm currently has 7,500 shares of stock outstanding at a price per share of $40.Net income is $9,500. The firm has decided to repurchase $20,000 worth of its outstanding stock.What will the firm's PE ratio be after this repurchase,all else held constant?

A) 23.39
B) 28.76
C) 29.47
D) 30.13
E) 32.16

F) A) and D)
G) B) and D)

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C

Question 2

Multiple Choice

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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

F) None of the above
G) B) and D)

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Question 3

Multiple Choice

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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?

Which one of the following is an argument that dividend policy is irrelevant?

Which one of the following best defines a regular cash dividend?

The ex-dividend date is defined as _____ day(s) before the date of record.

Which one of the following will result from a stock repurchase?

Which one of the following tends to be the primary attitude of firms' toward their dividend policy?

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 5-for-3 stock split?

What are the differences between a regular cash dividend,a liquidating dividend,a special dividend,and an extra cash dividend?

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.

Essary Brothers has 39,000 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?

Mercury Homes just declared a 4-for-3 stock split.Which of the following occurred as a result of this split? I.Number of shares outstanding increased by one-third II.Number of shares outstanding decreased by one-fourth III.Price per share increased by one-third IV.Price per share decreased by one-fourth

Which one of these statements is correct?

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?

Tom and Jerri currently own 300 shares of Alpha stock.Each share is currently worth $36.What will Tom and Jerri's investment in Alpha be worth if the company declares a 4-for-3 stock dividend?

Which one of the following reduces the number of shares outstanding but does not change a firm's total equity?

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?

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?

Pluto United has 18,000 shares of stock outstanding at a price per share of $38.How many shares will be outstanding if the firm does a 5-for-4 stock split?