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Exam 17: Dividends and Payout Policy

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Question 31

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Which one of the following statements related to dividend policy is correct?

A) The primary question related to dividend policy is whether or not a firm should ever pay a dividend.
B) Both dividends and dividend policy are irrelevant.
C) Dividend policy focuses on the timing of dividend payments.
D) Homemade dividends increase the importance of a firm's dividend policy decisions.
E) Whether or not a firm ever pays a dividend is irrelevant to equity valuation.

F) All of the above
G) C) and D)

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Question 32

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The Turtle Cave currently has 160,000 shares of stock outstanding that sell for $60 per share.Assume no market imperfections or tax effects exist.What will the new share price be if the firm declares a 10 percent stock dividend?

A) $52.17
B) $54.55
C) $60.00
D) $64.50
E) $69.00

F) B) and C)
G) All of the above

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Question 33

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What is the information content effect?

Which of the following balance sheet accounts are affected by a small stock dividend? I.cash II.common stock III.retained earnings IV.capital in excess of par value

Della's Pool Halls has 12,000 shares of stock outstanding with a par value of $1 per share and a market price of $39 a share.The firm just announced a 4-for-3 stock split.How many shares of stock will be outstanding after the split?

The board of directors of Wilson Sporting Equipment met this afternoon and passed a resolution to pay a cash dividend of $0.42 a share next month.In relation to this dividend,today is referred to as which one of the following dates?

East Coast Marina has 220,000 shares of stock outstanding.The current market value of the firm is $18.92 million.The company has retained earnings of $3.8 million,paid in surplus of $6.7 million,and a common stock account value of $220,000.The company is planning a 3-for-2 stock split.What will the market price per share be after the split?

Dividend payments are mailed on which one of the following dates?

The equity of Blooming Roses has a total market value of $16,000.Currently,the firm has excess cash of $1,400 and net income of $15,400.There are 750 shares of stock outstanding.What will be the percentage change in the stock price per share if the firm pays out all of its excess cash as a cash dividend?

Tucker's National Distributing has a current market value of equity of $10,665.Currently,the firm has excess cash of $640,total assets of $22,400,net income of $3,210,and 500 shares of stock outstanding.Tucker's is going to use all of its excess cash to repurchase shares of stock.What will the stock price per share be after the stock repurchase is completed?

Which of the following account balance changes occur as a result of a large stock dividend? I.increase in common stock II.decrease in capital in excess of par III.increase in capital in excess of par IV.decrease in retained earnings

The dividend market is in equilibrium when:

Green Roof Motels has more cash on hand than its operations require.Thus,the firm has decided to pay out some of its earnings in the form of cash to its shareholders.What are these payments to shareholders called?

Which one of the following statements related to cash dividends is correct?

A one-for-four reverse stock split will:

The owners' equity accounts for Blueswell Industries are shown here: $\begin{array} { l r } \text { Common stock (\$1 par value) } & \$ 9,000 \\\text { Capital surplus } & 174,000 \\\text { Retained earnings } & \underline { 568,500 } \\ { \text { Total owners' equity } } & \$ 751,500\end{array}$ If Blueswell Industries declares a 1-for-5 reverse stock split,there will be ____ shares outstanding at a par value of _____ per share.

Taylor's Tools declared a $0.48 per share dividend on Friday,March 7.The dividend will be paid on Monday,April 7.The ex-dividend date is Tuesday,March 18.What is the record date?

The common stock of Gillen Entertainment is selling for $65 a share.The par value per share is $1.Currently,the firm has a total market value of $936,000.How many shares of stock will be outstanding if the firm does a 5-for-2 stock split?

Glendale Paving currently has 120,000 shares of stock outstanding that sell for $54 per share.Assume no market imperfections or tax effects exist.What will the new share price be if the firm declares a 40 percent stock dividend?

Plyler Cabinets declared a dividend of $1.20 a share on May 15 to holders of record on Monday,June 1.The dividend is payable on June 15.Sara purchased 500 shares of Plyler Cabinets stock on Friday,May 29.How much dividend income will she receive on June 15 from Plyler Cabinets?