Question 1

Even if a stock split has no information content, and even if the dividend per share adjusted for the split is not increased, there can still be a real benefit (i.e., a higher value for shareholders) from such a split, but any such benefit is probably small.

Accepted Answer

A) True 
 B)False

Question 2

If management wants to maximize its stock price, and if it believes that the dividend irrelevance theory is correct, then it must adhere to the residual distribution policy.

Accepted Answer

A) True 
 B)False

Question 3

Which of the following statements is correct?

Accepted Answer

A)   If a company has a 2-for-1 stock split, its stock price should roughly double.
B)   Capital gains earned in a share repurchase are taxed less favourably than dividends; this explains why companies typically pay dividends and avoid share repurchases.
C)   Very often, a company's stock price will rise when it announces that it plans to commence a share repurchase program. Such an announcement could lead to a stock price decline, but this does not normally happen.
D)   The clientele effect is the best explanation for why companies tend to vary their dividend payments from quarter to quarter.E) All of the above
F) A) and B)

Question 4

Which of the following statements is correct?

Accepted Answer

A)   One advantage of dividend reinvestment plans is that they enable investors to avoid paying taxes on the dividends they receive.
B)   If a company has an established clientele of investors who prefer a high dividend payout, and if management wants to keep stockholders happy, it should NOT follow the strict residual dividend policy.
C)   If a firm follows a strict residual dividend policy, then, holding all else constant, its dividend payout ratio will tend to rise whenever the firm's investment opportunities improve.
D)   Despite its drawbacks, following the residual dividend policy will tend to stabilize actual cash dividends, and this will make it easier for firms to attract a clientele that prefers high dividends, such as retirees.E) None of the above
F) B) and C)

Question 5

If the information content, or signalling, hypothesis is correct, then changes in dividend policy can have an important effect on the firm's value and capital costs.

Accepted Answer

A) True 
 B)False

Exam 13: Distributions to Shareholders: Dividends and Repurchases

Even if a stock split has no information content, and even if the dividend per share adjusted for the split is not increased, there can still be a real benefit (i.e., a higher value for shareholders) from such a split, but any such benefit is probably small.

Correct Answer
verified

Which of the following statements is correct?

Correct Answer
verified

If management wants to maximize its stock price, and if it believes that the dividend irrelevance theory is correct, then it must adhere to the residual distribution policy.

Correct Answer
verified

Which of the following statements is correct?

Correct Answer
verified

If the information content, or signalling, hypothesis is correct, then changes in dividend policy can have an important effect on the firm's value and capital costs.

Correct Answer
verified

Exam 13: Distributions to Shareholders: Dividends and Repurchases

Even if a stock split has no information content, and even if the dividend per share adjusted for the split is not increased, there can still be a real benefit (i.e., a higher value for shareholders) from such a split, but any such benefit is probably small.

Correct AnswerverifiedShow Answer

Which of the following statements is correct?

Correct AnswerverifiedShow Answer

If management wants to maximize its stock price, and if it believes that the dividend irrelevance theory is correct, then it must adhere to the residual distribution policy.

Correct AnswerverifiedShow Answer

Which of the following statements is correct?

Correct AnswerverifiedShow Answer

If the information content, or signalling, hypothesis is correct, then changes in dividend policy can have an important effect on the firm's value and capital costs.

Correct AnswerverifiedShow Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified