Question 1

The clientele effect states that investors fall into various groups because of differences in their preferences for which one of the following?

Accepted Answer

A)  share price levels
B)  risk level
C)  rates of return
D)  dividends
E)  short-term versus long-term investmentsF) A) and B)
G) A) and C)

Question 2

If a firm follows a residual dividend policy,they will give precedence to:

Accepted Answer

A)  avoiding dividend cuts over changing the debt-equity ratio
B)  maintaining a constant level of debt before paying dividends
C)  paying dividends over accepting positive investments
D)  maintaining their desired debt-equity ratio over paying dividends
E)  paying a constant dividend over increasing retained earningsF) B) and C)
G) B) and E)

Question 3

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

Accepted Answer

A)  share split
B)  share repurchase
C)  reverse stock split
D)  liquidating dividend
E)  cash distributionF) B) and E)
G) B) and D)

Question 4

On which one of the following dates is the determination made as to which shareholders will receive a dividend payment?

Accepted Answer

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

Question 5

Macro Computers just paid their annual regular cash dividend of $1.20 a share,along with a special dividend of $0.30 a share.The company follows a policy of increasing their dividend by 2 per cent annually.Which one of the following is the best estimate of Macro's next annual dividend amount?

Accepted Answer

A)  $1.50
B)  $1.22
C)  $1.20
D)  $1.53
E)  $1.25F) A) and B)
G) All of the above

Question 6

Which of the following are given as reasons for a reverse stock split?
I.the lowering of the stock price to a level within the normal trading range for the stock
II.to eliminate small shareholders
III.to meet the minimum price per share requirement of a stock exchange
IV.to avoid delisting

Accepted Answer

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

Question 7

The ordinary shares of Bondi Beachwear closed at $36.80 a share today.Tomorrow morning,the share goes ex-dividend.The dividend that is being paid this half-year is $1.40 a share.The average tax rate on dividends for shareholders is estimated to be 15 per cent.All else equal,what should the opening share price be tomorrow morning?

Accepted Answer

A)  $35.40
B)  $35.19
C)  $35.70
D)  $35.61
E)  $35.52F) B) and D)
G) All of the above

Question 8

Ettalong Electric Ltd is preparing to pay its interim dividend of $2.20 a share this quarter.The shares closed at $57.70 a share today.What will the ex-dividend share price be if the estimated tax rate for shareholders is 10 per cent and all else is held constant?

Accepted Answer

A)  $55.50
B)  $55.94
C)  $55.99
D)  $55.28
E)  $55.72F) C) and E)
G) A) and E)

Question 9

Molly holds 1000 shares in a major bank listed on the ASX.The bank declared an interim dividend of $0.40 per share on January 15th with the date of record being February 1st.If Molly sells her shares on Monday January 28th which statement is correct?

Accepted Answer

A)  Molly has to make arrangements with the buyer regarding the dividend payment.
B)  Molly will receive the dividend on the shares because she owned the shares on January 15th,the day that the dividends were declared.
C)  Molly will not receive the dividend because the shares are ex-dividend on January 28th.
D)  Molly will receive the dividend because the ex-dividend date is January 30th.
E)  By January 28th Molly has already received the dividend.F) B) and D)
G) C) and D)

Question 10

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 1/3
II.number of shares outstanding decreased by 1/4
III.price per share increased by 1/3
IV.price per share decreased by 1/4

Accepted Answer

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

Question 11

All else constant,a 5-for-4 stock split will _____ the number of shares outstanding and _____ the market price per share.

Accepted Answer

A)  increase;decrease
B)  increase;increase
C)  decrease;increase
D)  increase;not change
E)  decrease;decreaseF) A) and E)
G) A) and D)

Question 12

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

Accepted Answer

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

Question 13

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

Accepted Answer

A)  decrease in the earnings per share
B)  increase in the market value of equity per share
C)  decrease in the market price per share
D)  decrease in the PE ratio
E)  increase in the number of shares outstandingF) A) and B)
G) A) and C)

Question 14

The WPY Company offers a one-for-nine bonus issue.If its shares are currently priced at $10 cum-bonus,then the theoretical price ex-bonus is:

Accepted Answer

A)  $11.11
B)  $8.50
C)  $10
D)  $9.50
E)  $9F) A) and B)
G) A) and D)

Question 15

XYZ declared a dividend of $0.80 a share.The ex-dividend date is tomorrow.All else constant,you would expect the opening price tomorrow morning to be:

Accepted Answer

A)  lower by an amount approximately equal to the after-tax value of the dividend
B)  the same as today's closing price since the dividend is expected
C)  $0.80 lower than today's closing price
D)  higher by an amount approximately equal to the after-tax value of the dividend
E)  $0.80 higher than today's closing priceF) A) and E)
G) A) and C)

Question 16

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?

Accepted Answer

A)  liquidating dividend of $0.40 per share
B)  special dividend of $0.40 per share
C)  extra dividend of $0.40 per share
D)  increase the regular dividend by $0.11 and pay an extra cash dividend of $0.29
E)  increase the regular dividend by $0.11 and pay a special dividend of $0.29F) A) and B)
G) B) and C)

Question 17

The Smart Guy Rental Company has 750 shares outstanding at a market price of $12 a share.The earnings per share are $1.20.The firm has current assets of $4000,net fixed assets of $6000,and total liabilities of $7000.Today,Smart Guy's is paying a cash dividend of $0.50 a share.Ignore taxes.After the dividend,the firm's:

Accepted Answer

A)  earnings per share will be $0.70
B)  price-earnings ratio will be 9.58
C)  shareholder value per share will be $13.20
D)  stock price will be $12.00
E)  book value per share will be $4.50F) A) and C)
G) A) and B)

Question 18

As compared to a cash dividend,a share repurchase will do which of the following?

Accepted Answer

A)  not affect the earnings per share but will decrease the PE ratio
B)  increase both earnings per share and the PE ratio
C)  increase the earnings per share but not affect the PE ratio
D)  increase the earnings per share and decrease the PE ratio
E)  not affect either the earnings per share or the PE ratioF) B) and E)
G) C) and D)

Question 19

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?

Accepted Answer

A)  price dividers
B)  trading range
C)  benchmark values
D)  split range
E)  price splitsF) C) and D)
G) A) and E)

Question 20

Which two of the following tend to limit the amount of dividends that can be paid by a leveraged corporation?
I.current tax laws
II.corporate tax rates
III.bond trust deed covenant
IV.laws pertaining to retained earnings

Accepted Answer

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

Exam 14: Dividends and Dividend Policy

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

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

Correct Answer
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Molly holds 1000 shares in a major bank listed on the ASX.The bank declared an interim dividend of $0.40 per share on January 15^th with the date of record being February 1^st.If Molly sells her shares on Monday January 28^th which statement is correct?

Correct Answer
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As compared to a cash dividend,a share repurchase will do which of the following?

Correct Answer
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If a firm follows a residual dividend policy,they will give precedence to:

Correct Answer
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Macro Computers just paid their annual regular cash dividend of $1.20 a share,along with a special dividend of $0.30 a share.The company follows a policy of increasing their dividend by 2 per cent annually.Which one of the following is the best estimate of Macro's next annual dividend amount?

Correct Answer
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The clientele effect states that investors fall into various groups because of differences in their preferences for which one of the following?

Correct Answer
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Correct Answer
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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?

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

Correct Answer
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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 1/3 II.number of shares outstanding decreased by 1/4 III.price per share increased by 1/3 IV.price per share decreased by 1/4

Correct Answer
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All else constant,a 5-for-4 stock split will _ the number of shares outstanding and _ the market price per share.

Correct Answer
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The WPY Company offers a one-for-nine bonus issue.If its shares are currently priced at $10 cum-bonus,then the theoretical price ex-bonus is:

Correct Answer
verified

On which one of the following dates is the determination made as to which shareholders will receive a dividend payment?

Correct Answer
verified

Correct Answer
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Which of the following are given as reasons for a reverse stock split? I.the lowering of the stock price to a level within the normal trading range for the stock II.to eliminate small shareholders III.to meet the minimum price per share requirement of a stock exchange IV.to avoid delisting

Correct Answer
verified

Which two of the following tend to limit the amount of dividends that can be paid by a leveraged corporation? I.current tax laws II.corporate tax rates III.bond trust deed covenant IV.laws pertaining to retained earnings

Correct Answer
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Ettalong Electric Ltd is preparing to pay its interim dividend of $2.20 a share this quarter.The shares closed at $57.70 a share today.What will the ex-dividend share price be if the estimated tax rate for shareholders is 10 per cent and all else is held constant?

Correct Answer
verified

XYZ declared a dividend of $0.80 a share.The ex-dividend date is tomorrow.All else constant,you would expect the opening price tomorrow morning to be:

Correct Answer
verified

Exam 14: Dividends and Dividend Policy

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

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Molly holds 1000 shares in a major bank listed on the ASX.The bank declared an interim dividend of $0.40 per share on January 15th with the date of record being February 1st.If Molly sells her shares on Monday January 28th which statement is correct?

Correct AnswerverifiedShow Answer

As compared to a cash dividend,a share repurchase will do which of the following?

Correct AnswerverifiedShow Answer

If a firm follows a residual dividend policy,they will give precedence to:

Correct AnswerverifiedShow Answer

Macro Computers just paid their annual regular cash dividend of $1.20 a share,along with a special dividend of $0.30 a share.The company follows a policy of increasing their dividend by 2 per cent annually.Which one of the following is the best estimate of Macro's next annual dividend amount?

Correct AnswerverifiedShow Answer

The clientele effect states that investors fall into various groups because of differences in their preferences for which one of the following?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

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?

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

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 1/3 II.number of shares outstanding decreased by 1/4 III.price per share increased by 1/3 IV.price per share decreased by 1/4

Correct AnswerverifiedShow Answer

All else constant,a 5-for-4 stock split will _____ the number of shares outstanding and _____ the market price per share.

Correct AnswerverifiedShow Answer

The WPY Company offers a one-for-nine bonus issue.If its shares are currently priced at $10 cum-bonus,then the theoretical price ex-bonus is:

Correct AnswerverifiedShow Answer

On which one of the following dates is the determination made as to which shareholders will receive a dividend payment?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Which of the following are given as reasons for a reverse stock split? I.the lowering of the stock price to a level within the normal trading range for the stock II.to eliminate small shareholders III.to meet the minimum price per share requirement of a stock exchange IV.to avoid delisting

Correct AnswerverifiedShow Answer

Which two of the following tend to limit the amount of dividends that can be paid by a leveraged corporation? I.current tax laws II.corporate tax rates III.bond trust deed covenant IV.laws pertaining to retained earnings

Correct AnswerverifiedShow Answer

Ettalong Electric Ltd is preparing to pay its interim dividend of $2.20 a share this quarter.The shares closed at $57.70 a share today.What will the ex-dividend share price be if the estimated tax rate for shareholders is 10 per cent and all else is held constant?

Correct AnswerverifiedShow Answer

XYZ declared a dividend of $0.80 a share.The ex-dividend date is tomorrow.All else constant,you would expect the opening price tomorrow morning to be:

Correct AnswerverifiedShow Answer

Correct Answer
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Correct Answer
verified

Correct Answer
verified

Molly holds 1000 shares in a major bank listed on the ASX.The bank declared an interim dividend of $0.40 per share on January 15^th with the date of record being February 1^st.If Molly sells her shares on Monday January 28^th which statement is correct?

Correct Answer
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Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
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Correct Answer
verified

Correct Answer
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All else constant,a 5-for-4 stock split will _ the number of shares outstanding and _ the market price per share.

Correct Answer
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Correct Answer
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Correct Answer
verified

Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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