Question 1

Investors in high marginal tax brackets prefer dividends while investors in low marginal tax brackets prefer to have corporate earnings reinvested.

Accepted Answer

A) True 
 B)False

Question 2

The ex-dividend date is the date on which:

Accepted Answer

A)   recipients of the dividend are determined.
B)   the dividend is paid.
C)   the dividend is declared.
D)   the stock bought no longer includes the right to receive dividend payments.E) A) and D)
F) All of the above

Question 3

Shareholders may prefer dividends to reinvestment by the firm:

Accepted Answer

A)   because dividends provide the highest return to investors.
B)   because dividend payments are tax free.
C)   because investors may prefer current cash to future cash.
D)   because shareholders may prefer faster growth in the firm.E) A) and B)
F) B) and C)

Question 4

The primary purpose of a stock split is to:

Accepted Answer

A)   indicate the firm's desire to retain funds.
B)   increase the investor's overall wealth.
C)   reduce the threat of a takeover by creating more shares.
D)   bring the share price to a lower trading range.E) All of the above
F) C) and D)

Question 5

Pharma Duece Corporation, which manufactures biotech drugs, has been experiencing a tremendous growth in the price of its common stock. The stock price increased from $4.50 on January 1, 20X1 to $18.00 per share on December 31, 20X5. Its current net worth statement is as follows:
  A) What changes would occur in the above statement of net worth after a 2 for 1 stock split?
B) Earnings for 20X5 were $1,575,000, what would EPS be before and after the stock split?

Accepted Answer

The answer of Pharma Duece Corporation, which manufactures biotech drugs,...

Question 6

Inflation can affect dividend payouts in that:

Accepted Answer

A)   higher interest rates resulting from inflation have left more earnings available for dividends.
B)   inflation leads investors to demand higher payouts.
C)   corporations are hesitant to pay dividends from inflation-caused "inventory profits."
D)   dividend payouts decrease due to slower earnings growth in an inflationary economy.E) All of the above
F) A) and B)

Question 7

CBA Inc. has 250,000 shares outstanding. The shares were issued for $14. The stock is currently selling for $34. CBA has $5,000,000 in retained earnings and has declared a stock dividend that will increase the number of outstanding shares by 6%. What will be the common stock account after the stock dividend?

Accepted Answer

A)   $510,000
B)   $3,500,000
C)   $4,010,000
D)   $8,500,000E) A) and C)
F) A) and B)

Question 8

A firm may repurchase stock in the market because:

Accepted Answer

A)   it will decrease the shareholder's wealth.
B)   the firm has inadequate capital budgeting alternatives.
C)   it provides negative informational content.
D)   the shareholders want to divest.E) All of the above
F) B) and C)

Question 9

A stock split is different from a stock dividend due to:

Accepted Answer

A)   delisting by stock exchanges.
B)   the resulting change in market price of the common shares.
C)   the shares outstanding after the split or dividend will have an increased market value.
D)   no transfer of funds from retained earnings to the capital accounts.E) A) and C)
F) B) and C)

Question 10

Because the investor is taxed whether dividends are received or not, there are no real advantages to a dividend reinvestment plan.

Accepted Answer

A) True 
 B)False

Exam 18: Dividend Policy and Retained Earnings

The primary purpose of a stock split is to:

Correct Answer
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Inflation can affect dividend payouts in that:

Correct Answer
verified

A firm may repurchase stock in the market because:

Correct Answer
verified

Correct Answer
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Shareholders may prefer dividends to reinvestment by the firm:

Correct Answer
verified

The ex-dividend date is the date on which:

Correct Answer
verified

Because the investor is taxed whether dividends are received or not, there are no real advantages to a dividend reinvestment plan.

Correct Answer
verified

Correct Answer
verified

A stock split is different from a stock dividend due to:

Correct Answer
verified

Investors in high marginal tax brackets prefer dividends while investors in low marginal tax brackets prefer to have corporate earnings reinvested.

Correct Answer
verified

Exam 18: Dividend Policy and Retained Earnings

The primary purpose of a stock split is to:

Correct AnswerverifiedShow Answer

Inflation can affect dividend payouts in that:

Correct AnswerverifiedShow Answer

A firm may repurchase stock in the market because:

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Shareholders may prefer dividends to reinvestment by the firm:

Correct AnswerverifiedShow Answer

The ex-dividend date is the date on which:

Correct AnswerverifiedShow Answer

Because the investor is taxed whether dividends are received or not, there are no real advantages to a dividend reinvestment plan.

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

A stock split is different from a stock dividend due to:

Correct AnswerverifiedShow Answer

Investors in high marginal tax brackets prefer dividends while investors in low marginal tax brackets prefer to have corporate earnings reinvested.

Correct AnswerverifiedShow Answer

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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Correct Answer
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