Corporate Finance 4

Which of the following dividends is never in the form of cash?

• Regular dividend

• Special dividend

• Stock dividend

• Liquidation dividend

. Dividends are decided by

• The managers of a firm

• The employees of a firm

• The board of directors

• The government

Reorder the following

• Payment date

• Announcement date

• Record date

• Ex-dividend date

One possible reason that shareholders often insist on higher dividends is

• They agree with Miller and Modigliani

• They do not trust managers to spend retained earnings wisely

• The stock market is efficient

• Tax considerations

Find the share price of a company with a dividend stream of $5, cost of capital 10%, and growth rate 8%:

• $275

• $300

• $200

• $250

What would you expect to happen to the price of a share of stock on the day it goes ex-dividend? The price should:

• increase by the amount of the dividend

• decrease by the amount of the dividend

• decrease by one-half the amount of the dividend

• remain constant

ABC Corp. stock is selling for $30 per share when a 10% stock dividend is declared. If you own 100 shares of ABC Corp. then you will receive:

• $3

• $300

• $300 plus 10 shares of ABC Corp

• 10 shares of ABC Corp

A policy of dividend "smoothing" refers to:

• maintaining a constant dividend payout ratio

• keeping the regular dividend at the same level indefinitely

• maintaining a steady progression of dividend increases over time

• alternating cash dividends with stock dividends

Which of the following signals is most likely to elicit a decrease in share price for slow growth utility company that currently pays a small dividend?

• A repurchase of 5% of the firm's stock

• An unexpected increase in the regular quarterly dividend

• An unexpected decrease in the regular quarterly dividend

• Borrowing funds in order to pay a cash dividend

After the payment of a 25% stock dividend, an investor has 500 shares of stock and $400 total value. What did the investor have prior to the stock dividend?

• 375 shares of stock and $375 total value

• 400 shares of stock and $400 total value

• 400 shares of stock and $500 total value

• 625 shares of stock and $400 total value