A) 47.50
B) 49.88
C) 50.00
D) 52.50
E) 55.13
G) B) and C)
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C
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B) False
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True
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A) Declare a stock split.
B) Begin an open-market purchase dividend reinvestment plan.
C) Initiate a stock repurchase program.
D) Begin a new-stock dividend reinvestment plan.
E) Refund long-term debt with lower cost short-term debt.
G) C) and E)
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B) False
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B) False
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A) $28.43
B) $29.93
C) $31.50
D) $33.08
E) $34.73
G) A) and C)
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A) A strong preference by most shareholders for current cash income versus capital gains.
B) Constraints imposed by the firm's bond indenture.
C) The fact that much of the firm's equipment has been leased rather than bought and owned.
D) The fact that Congress is considering changes in the tax law regarding the taxation of dividends versus capital gains.
E) The firm's ability to accelerate or delay investment projects.
G) B) and D)
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A) Back before the SEC was created in the 1930s,companies would declare reverse splits in order to boost their stock prices.However,this was determined to be a deceptive practice,and it is illegal today.
B) Stock splits create more administrative problems for investors than stock dividends,especially determining the tax basis of their shares when they decide to sell them,so today stock dividends are used far more often than stock splits.
C) When a company declares a stock split,the price of the stock typically declines⎯by about 50% after a 2-for-1 split⎯and this necessarily reduces the total market value of the equity.
D) If a firm's stock price is quite high relative to most stocks⎯say $500 per share⎯then it can declare a stock split of say 10-for-1 so as to bring the price down to something close to $50.Moreover,if the price is relatively low⎯say $2 per share⎯then it can declare a "reverse split" of say 1-for-25 so as to bring the price up to somewhere around $50 per share.
E) When firms are deciding on the size of stock splits⎯say whether to declare a 2-for-1 split or a 3-for-1 split,it is best to declare the smaller one,in this case the 2-for-1 split,because then the after-split price will be higher than if the 3-for-1 split had been used.
G) A) and B)
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A) $42,869
B) $45,125
C) $47,500
D) $50,000
E) $52,500
G) C) and D)
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A) 30.54%
B) 32.15%
C) 33.84%
D) 35.63%
E) 37.50%
G) C) and E)
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A) $514,425 $162,901
B) $541,500 $171,475
C) $570,000 $180,500
D) $600,000 $190,000
E) $ 0 $200,000
G) B) and C)
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A) An open-market dividend reinvestment plan will be most attractive to companies that need new equity and would otherwise have to issue additional shares of common stock through investment bankers.
B) Stock repurchases tend to reduce financial leverage.
C) If a company declares a 2-for-1 stock split,its stock price should roughly double.
D) One advantage of adopting the residual dividend policy is that this makes it easier for corporations to meet the requirements of Modigliani and Miller's dividend clientele theory.
E) If a firm repurchases some of its stock in the open market,then shareholders who sell their stock for more than they paid for it will be subject to capital gains taxes.
G) B) and E)
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A) One reason that companies tend to avoid stock repurchases is that dividend payments are taxed at a lower rate than gains on stock repurchases.
B) One advantage of dividend reinvestment plans is that they allow shareholders to avoid paying taxes on the dividends that they choose to reinvest.
C) One key advantage of a residual dividend policy is that it enables a company to follow a stable dividend policy.
D) The clientele effect suggests that companies should follow a stable dividend policy.
E) Modigliani and Miller argue that investors prefer dividends to capital gains because dividends are more certain than capital gains.They call this the "bird-in-the hand" effect.
G) A) and B)
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A) One advantage of the residual dividend policy is that it leads to a stable dividend payout,which investors like.
B) An increase in the stock price when a company decreases its dividend is consistent with signaling theory as postulated by MM.
C) If the "clientele effect" is correct,then for a company whose earnings fluctuate,a policy of paying a constant percentage of net income will probably maximize the stock price.
D) Stock repurchases make the most sense at times when a company believes its stock is undervalued.
E) Firms with a lot of good investment opportunities and a relatively small amount of cash tend to have above average payout ratios.
G) None of the above
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A) 40.61%
B) 42.75%
C) 45.00%
D) 47.37%
E) 49.74%
G) B) and E)
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A) $122,176
B) $128,606
C) $135,375
D) $142,500
E) $150,000
G) A) and C)
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B) False
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A) $ 898,750 55.63%
B) $ 943,688 58.41%
C) $ 990,872 61.34%
D) $1,040,415 64.40%
E) $1,092,436 67.62%
G) A) and B)
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A
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A) $50.00
B) $52.50
C) $55.13
D) $57.88
E) $60.78
G) B) and D)
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B) False
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