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Tattler,Inc.has declared a $4.60 per share dividend.Suppose capital gains are not taxed,but dividends are taxed at 20 percent.New IRS regulations require that taxes be withheld at the time the dividend is paid.Tattler sells for $87 per share,and the stock is about to go ex-dividend.What do you think the ex-dividend price will be?


A) $82.40
B) $83.32
C) $85.08
D) $86.67
E) $87.00

F) A) and E)
G) A) and B)

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Innovative Technologies has 50,000 shares of stock outstanding at a market price of $8 a share.Which one of the following stock splits should the firm declare if it wants to increase the stock price to exactly $20 a share? Ignore any taxes or market imperfections.


A) 5-for-2 stock split
B) 3-for-1 stock split
C) 1-for-3-reverse stock split
D) 2-for-5 reverse stock split
E) 3-for-10 reverse stock split

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

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John's has common stock outstanding at a price of $27 a share.The total market value of the equity is $435,000.How many shares of stock will be outstanding if the firm does a 2-for-5 reverse stock split?


A) 40,278 shares
B) 36,000 shares
C) 6,444 shares
D) 7,500 shares
E) 16,500 shares

F) A) and C)
G) A) and B)

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Cash dividends send which two of the following signals to the market? I.Agency costs will be lowered since less cash will be held by the firm. II.The firm is planning on downsizing. III.The firm is currently,and expects to continue to be,profitable. IV.The firm will no longer conduct stock repurchases.


A) I and II only
B) II and III only
C) III and IV only
D) II and IV only
E) I and III only

F) B) and E)
G) C) and D)

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Dragon Trucking just paid its annual regular cash dividend of $1.25 a share,along with a special dividend of $0.25 a share.The company follows a policy of increasing its dividend by 3 percent annually.Which one of the following is the best estimate of the firm's next annual dividend payment?


A) $1.25
B) $1.29
C) $1.49
D) $1.50
E) $1.54

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

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Which one of the following statements is correct concerning dividends in the U.S.?


A) The total amount of dividends paid by the S&P 500 companies has increased steadily every year since 1985.
B) Only financial sector firms decreased dividends in 2008.
C) Dividend amounts tend to react quickly to changes in the economy.
D) Firms tend to quickly adjust their dividends to changes in the firm's earnings per share.
E) There are less than 75 companies in the U.S. that have consistently increased their dividends for at least the past 25 years.

F) A) and B)
G) A) and C)

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Which one of the following increases the number of shares outstanding but does not increase the value of owners' equity?


A) Stock repurchase
B) Reverse stock split
C) Stock split
D) Cash distribution
E) Liquidating dividend

F) A) and B)
G) B) and E)

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Which of the following are factors that help explain why the percentage of U.S.industrial firms paying dividends has increased since the early 2000s? I.Decrease in the number of non-dividend-paying firms II.Maturing of young,successful firms III.Signaling of a firm's financial health IV.May 2003 tax act


A) I and III only
B) II and IV only
C) I, II, and III only
D) II, III, and IV only
E) I, II, III, and IV

F) B) and C)
G) C) and D)

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Botanical Gardens Nursery has 6,800 shares of stock outstanding at a market price of $21 a share.The earnings per share are $1.54.The firm has total assets of $315,000 and total liabilities of $186,000.Today,the firm is paying an annual cash dividend of $0.82 a share.Ignore taxes.What will the earnings per share be after the dividend is paid?


A) $0.31
B) $0.74
C) $1.54
D) $20.70
E) $21.02

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

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Haywood and More have a market value balance sheet as shown below.The firm currently has 5,000 shares of stock outstanding at a market price per share of $35.40.Net income is $9,500. Haywood and More have a market value balance sheet as shown below.The firm currently has 5,000 shares of stock outstanding at a market price per share of $35.40.Net income is $9,500. The firm has decided to spend $8,000 and pay an extra cash dividend.What will the firm's PE ratio be after this dividend is paid,all else held constant? Ignore taxes. A) 14.20 B) 16.67 C) 18.63 D) 21.22 E) 24.50 The firm has decided to spend $8,000 and pay an extra cash dividend.What will the firm's PE ratio be after this dividend is paid,all else held constant? Ignore taxes.


A) 14.20
B) 16.67
C) 18.63
D) 21.22
E) 24.50

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

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The common stock of White's Hardware closed at $36.80 a share today.Tomorrow morning,the stock goes ex-dividend.The dividend that is being paid this quarter is $1.40 a share.The tax rate on dividends is 25 percent.All else equal,what should the opening stock price be tomorrow morning?


A) $35.19
B) $35.40
C) $35.52
D) $35.75
E) $36.80

F) A) and E)
G) B) and E)

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Tuesday,December 1,is the ex-dividend date for Alpha stock.Which one of the following dates is the record date? Assume there are no banking holidays to consider.


A) Friday, November 27
B) Monday, November 30
C) Wednesday, December 2
D) Thursday, December 3
E) Friday, December 4

F) A) and D)
G) A) and C)

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During the past year,ABC stock has sold for as little as $19 a share and a much as $33 a share.Which one of the following terms applies to these prices?


A) Benchmark values
B) Price splits
C) Price dividers
D) Split range
E) Trading range

F) C) and E)
G) A) and D)

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Assume there are no taxes or imperfections.Given this assumption,which one of the following statements is correct?


A) A cash dividend has no effect on the market price of the payer's stock.
B) A cash dividend decreases shareholder wealth.
C) Stock repurchases decrease the market value per share.
D) Both a cash dividend and a share repurchase increase a firm's PE ratio.
E) A stock repurchase has the same effect on a firm's market value balance sheet as does a cash dividend.

F) B) and D)
G) C) and E)

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Heidi owns 400 shares of Boyd Enterprises stock,which is valued at $17 a share.Boyd Enterprises just declared a 10 percent stock dividend.How many shares will Heidi own and what will the price per share be after the dividend?


A) 360; $15.45
B) 360; $18.70
C) 440; $15.45
D) 440; $17.00
E) 440; $18.70

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

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Which one of the following is a drawback of cash dividends?


A) Firms may have to forgo positive net present value projects.
B) Stock prices tend to increase as annual dividend amounts increase.
C) Cash dividends support stock prices.
D) Dividends are felt to be directly related to agency costs.
E) Dividend-paying firms tend to attract a wider field of investors than do non-dividend-paying firms.

F) A) and D)
G) A) and E)

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Which one of the following statements is correct concerning the taxation of dividends and capital gains?


A) Seventy percent of capital gains derived from stock investments are tax exempt for corporate investors.
B) Dividends are a form of tax-exempt income for individual investors.
C) All investors are subject to the same tax rate on dividend income.
D) Individual investors can defer taxation on both dividends and capital gains.
E) As of 2003, individual investors pay a 15 percent tax on both dividends and capital gains.

F) A) and B)
G) C) and E)

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Green Thumb Nursery has 6,000 shares of stock outstanding at a market price of $20 a share.The earnings per share are $1.62.The firm has total assets of $315,000 and total liabilities of $186,000.Today,the firm is repurchasing $4,800 worth of stock.Ignore taxes.What will the earnings per share be after the stock repurchase?


A) $1.283
B) $1.232
C) $1.620
D) $1.688
E) $1.848

F) A) and B)
G) A) and C)

Correct Answer

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Davidson Interiors declared a dividend to holders of record on Thursday,October 15,that is payable on Monday,November 2.Suenette purchased 200 shares of Davidson Interiors stock on Monday,October 12,and Jake purchased 100 shares of this stock on the following day.Which one of the following statements is correct given this information?


A) Both Suenette and Jake will receive this dividend.
B) Suenette will receive the dividend but Jake will not.
C) Jake will receive the dividend but Suenette will not.
D) Neither Suenette nor Jake will receive this dividend.
E) You cannot determine who will or will not receive this dividend based on the information provided.

F) C) and D)
G) A) and E)

Correct Answer

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The balance sheet for Quik Treats,Inc.is shown here in market value terms.There are 20,000 shares of stock outstanding. The balance sheet for Quik Treats,Inc.is shown here in market value terms.There are 20,000 shares of stock outstanding. The company has declared a dividend of $1.40 per share.The stock goes ex-dividend tomorrow.Ignore any tax effects.What will the firm's equity value be after the dividend is paid? A) $572,000 B) $587,000 C) $603,000 D) $615,000 E) $643,000 The company has declared a dividend of $1.40 per share.The stock goes ex-dividend tomorrow.Ignore any tax effects.What will the firm's equity value be after the dividend is paid?


A) $572,000
B) $587,000
C) $603,000
D) $615,000
E) $643,000

F) A) and C)
G) C) and D)

Correct Answer

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