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Nature's Escape sponsors outdoor adventures for people of all ages.The company has a cyclical dividend policy and a target payout ratio of 0.55.The estimated earnings per share for the next year,by quarter,are $1.20,$0.20,$1.80,and $1.40,respectively.Nature's Escape anticipates paying:


A) an annual dividend in the fourth quarter of $2.53 a share
B) an annual dividend in the fourth quarter of $2.07 a share
C) quarterly dividends of $0.66,$0.11,$0.99,and $0.77 per share,respectively over the next four quarters
D) a quarterly dividend of $0.6325 per share for each of the next four quarters
E) quarterly dividends of $0.54,$0.09,$0.81,and $0.63 per share,respectively over the next four quarters

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

Correct Answer

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Taylor Industries pays out 40 per cent of their quarterly earnings as a dividend each quarter.This firm has a(n) _____ dividend policy.


A) extra
B) residual
C) cyclical
D) stable
E) special

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

Correct Answer

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


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

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

Correct Answer

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C

Which one of the following would tend to favour a low dividend payout?


A) high flotation cost for equity issues
B) higher tax rates on capital gains than on dividend income
C) endowment fund investors who cannot spend principal
D) elimination of the tax-deferral on capital gains
E) investors' desire for a high dividend yield

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

Correct Answer

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Bartly,Inc. ,pays a quarterly dividend which is based on a constant percentage of earnings over the firm's earnings cycle.The company has a(n) _____ dividend policy.


A) extra
B) stable
C) cyclical
D) residual
E) special

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

Correct Answer

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Bryo Inc.paid quarterly dividends of $0.62 a share last year.The company currently has excess cash and would like to distribute $0.95 a share to its shareholders this quarter.However,the company is concerned about increasing the dividend as they are unsure if they can afford a $0.95 quarterly dividend on an ongoing basis.Management does not want to decrease their dividend once it has been increased.The best form of a dividend payment for this quarter is probably:


A) an extra dividend of $0.95 a share
B) a stock dividend with a value of $0.95 a share
C) a special dividend of $0.95 a share
D) a combined regular and extra dividend in one quarterly payment of $0.95 a share
E) a combined special and extra dividend in one quarterly payment of $0.95 a share

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

Correct Answer

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Which of the following would generally coincide with the overall priorities of a compromise dividend policy? I.allowing the debt-equity ratio to increase temporarily to avoid a dividend cut II.forgoing a major positive investment to avoid the issuance of new shares III.maintaining a constant debt-equity ratio by selling additional shares as needed IV.limiting positive net present value projects in order to reach a target dividend payout ratio


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

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

Correct Answer

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Bloomington Homes needs $168 000 for new investments next year.The company has a debt-equity ratio of 0.55 and has a residual dividend policy.The after-tax earnings for the year that just ended were $247 500.How much of their annual earnings will the firm pay out in dividends?


A) $139 112.90
B) $102 348.16
C) $71 900.00
D) $0
E) $147 500.00

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

Correct Answer

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


A) one-time payment of cash by a firm to its shareholders
B) distribution by a firm to its shareholders
C) distribution of the proceeds from the sale of a portion of a firm's operations
D) cash payment by a firm to its owners as part of a firm's normal operations
E) payment from any source by a firm to its owners

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

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D

Kelso's is considering spending $80 000 on either a share repurchase or an extra cash dividend.Which one of the following values will be the same whether the firm pays a dividend or repurchases shares? Assume there are no taxes or market imperfections.


A) number of shares outstanding
B) price-earnings ratio
C) earnings per share
D) price per share
E) market value of equity per share

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

Correct Answer

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Which one of the following dates is the date on which the board of directors voted to pay a dividend?


A) payment date
B) settle date
C) record date
D) ex-dividend date
E) declaration date

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

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Which one of the following is an example of a liquidating dividend?


A) Valley Feed Mills recently sold its grain storage facility and is distributing the proceeds of that sale to its shareholders.
B) Kate's Winery has excess cash that it wishes to distribute to its shareholders in addition to its normal cash dividend.This extra distribution usually occurs about once every year.
C) Hi Tek had an extraordinarily profitable year and has decided to do a one-time only $10 per share cash dividend.
D) Kurt's Music is planning to increase its quarterly dividend by 3 per cent.
E) The Dried Florist is preparing to pay its first annual dividend of $0.08 per share.

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

Correct Answer

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On which one of the following dates are dividends direct deposited to shareholders bank accounts?


A) ex-dividend date
B) public announcement date
C) payment date
D) declaration date
E) date of record

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

Correct Answer

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A company declares a five-for-three split to rationalise its share structure.If the company currently has 1 750 000 shares of stock outstanding,there will be ____ shares outstanding after the split.


A) 1 350 000
B) 1 602 000
C) 2 500 000
D) 1 050 000
E) 2 916 667

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

Correct Answer

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The common stock of Basek and Basek goes ex-dividend tomorrow.The stock closed at a price of $38.13 a share today.This quarter,the company is paying a cash dividend of $0.15 a share and a liquidating dividend of $2.50 a share.Ignoring taxes and assuming that all else is constant,the opening ex-dividend price is expected to be:


A) $36.33
B) $35.33
C) $35.63
D) $35.48
E) $37.98

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

Correct Answer

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Which one of the following factors favours a high dividend payout?


A) tax deferment on capital gains,but not on dividend income
B) corporate investors
C) low transaction costs on share trades
D) lower taxes on capital gains than on dividends
E) flotation costs

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

Correct Answer

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Which one of the following statements is correct?


A) Corporate investors tend to prefer low dividend payouts on securities they own.
B) Flotation costs are a good reason to support a high dividend payout.
C) Current tax laws favour low dividends for individual Australian investors.
D) Dividends are irrelevant.
E) Dividend policy is the time pattern of dividend payout.

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

Correct Answer

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Which one of the following events must occur before a firm can offer a liquidating dividend?


A) bankruptcy filing
B) negative equity
C) insolvency declaration
D) failed bond issue
E) asset sale

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

Correct Answer

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


A) distribution
B) reverse split
C) redemption
D) share split
E) liquidation

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

Correct Answer

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Research conducted on firms' dividend policies over time support which one of the following conclusions?


A) Firms commence paying dividends prior to doing any stock repurchases.
B) Dividends are currently paid by the vast majority of firms.
C) Managers tend to smooth dividends.
D) Aggregate dividends and stock repurchases have steadily declined in real terms.
E) Stock prices tend to increase whenever anticipated changes in dividends occur.

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

Correct Answer

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C

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