WACC and Dividend policy

A reverse split implies that the share value after the split will…

• increase

• decrease

• stay the same

What would happen to the after tax cost of debt if there is an increase in the corporate tax rate:

• will increase

• will decrease

• will remain the same

A debt equity ratio of 1,5 implies…

• for every 1,5 collected in debt there is 1 collected through equity

• for every 0,5 collected in debt there is 1 collected through equity

• for every 1 collected in debt there is 1,5 collected through equity

• for every 1 collected in debt there is 0,5 collected through equity

On May 7, Melbourne Mining declared a $.50-per-share quarterly dividend payable June 28 to stockholders of record on Friday, June 7. What is the latest date by which you could purchase the stock and still get the recently declared dividend?

• June 3

• June 4

• June 5

• June 6

All of the following are true of stock splits EXCEPT:

• market price per share is reduced after the split.

• the number of outstanding shares is increased

• retained earnings are changed

• proportional ownership is unchanged.

If an individual stockholder reinvests dividends under a company's dividend reinvestment plan, the reinvested dividends are

• not taxable to the shareholder.

• taxable to the shareholder

Which of these sources of financing have the highest priority in case of financial trouble:

• bonds

• preferred stocks

• common stocks

In case of partially debt-financed firm, WACC is less than

• Rd

• Re

• Both

• None

In order to calculate Weighted Average Cost of weights may be based on:

• Market values

• Book values

• Both

• None

Firm's Cost of Capital is the average cost of:

• All sources

• All borrowings

• Sharte capital - equity