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Fresh Baked Goods has 36,800 shares of stock outstanding at a market price of $24.91per share.What will be the price per share after a stock dividend of 6 percent? Ignore taxes and market imperfections.


A) $24.90
B) $23.50
C) $25.00
D) $25.31
E) $25.40

F) None of the above
G) B) and E)

Correct Answer

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O & B International just announced it will be paying an annual dividend of $1.10 a share plus an extra dividend of $.41 a share this year.The company also announced that its regular dividend,which is all it anticipates paying after this year,will increase by 2 percent annually.What is the anticipated dividend per share next year?


A) $1.1169
B) $1.1238
C) $1.1220
D) $1.5402
E) $1.1059

F) A) and E)
G) B) and C)

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Which one of the following events must occur before a firm can offer a liquidating dividend?


A) Bankruptcy filing
B) Insolvency declaration
C) Asset sale
D) Negative equity
E) Failed bond issue

F) C) and E)
G) B) and C)

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Of the following,which two are the best reasons for doing a reverse stock split? I.Return a stock to its normal trading range II.Eliminate small shareholders III.Reduce shareholder costs IV.Avoid delisting


A) I and II
B) I and III
C) II and III
D) II and IV
E) III and IV

F) C) and D)
G) A) and C)

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Metal Fabricators recently sold its poorest performing division and realized netproceeds from the transaction of $1.63 million.The firm has 320,000 shares of stock outstanding and a market price of $49 a share.The firm is now preparing to distribute the entire sale proceeds in the form of a liquidating dividend.What is the best estimate of the ex-dividend stock price? Ignore taxes and market imperfections.


A) $43.91
B) $41.38
C) $44.40
D) $43.79
E) $44.14

F) All of the above
G) A) and B)

Correct Answer

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Which one of the following statements is correct concerning the taxation of dividends and capital gains?


A) Seventy percent of capital gains derived from stock investments are tax exempt for corporate investors.
B) Dividends are a form of tax-exempt income for individual investors.
C) All investors are subject to the same tax rate on dividend income.
D) Individual investors can defer taxation on both dividends and capital gains.
E) As of 2015, individual investors pay a tax rate that varies from 0 to 15 percent on dividend income

F) A) and E)
G) A) and B)

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Which statement is correct?


A) Cash dividends and stock repurchases are treated equally for tax purposes.
B) In total dollars, cash dividends outweighed stock repurchases for the period 2003-2013.
C) Many firms either ceased paying or decreased their dividends per share in response to the 2003 change in dividend taxation.
D) Firms tend to prefer cash dividends over share repurchases for their flexibility and tax benefits.
E) A non-dividend-paying firm is more apt to do a stock repurchase than to commence paying dividends

F) B) and D)
G) C) and E)

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Kelsey International declared a dividend on Friday,November 13,that is payable on Friday,December 11,to holders of record on Monday,November 30.What is the latest date that you can purchase this stock if you wish to receive this dividend? Assume there are no banking holidays within this period of time.


A) Tuesday, November 24
B) Wednesday, November 25
C) Thursday, November 26
D) Friday, November 27
E) Monday, November 30

F) B) and E)
G) B) and C)

Correct Answer

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The Press has total assets of $848,000 and total debt of $402,000 on a market value basis.There are 25,000 shares of stock outstanding.The company has announced it is going to repurchase $40,000 worth of stock in the open market.What will be the price per share after the repurchase?


A) $36.29
B) $17.84
C) $38.67
D) $39.42
E) $39.89

F) All of the above
G) B) and E)

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Which of these is a noncash payment made by a firm to its shareholders that lessens the value of each outstanding share?


A) Reverse stock split
B) Cash distribution
C) Stock dividend
D) Regular dividend
E) Liquidating dividend

F) A) and D)
G) D) and E)

Correct Answer

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A market value balance sheet shows cash of $91,000; fixed assets of $327,000,and equity of $418,000.There are 16,000 shares of stock outstanding.The company has declared a dividend of $.82 per share.The stock goes ex-dividend tomorrow.Ignore any tax effects.What will be the firm's market equity value after the dividend is paid?


A) $372,020
B) $404,880
C) $419,560
D) $418,000
E) $397,810

F) A) and C)
G) A) and B)

Correct Answer

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Which one of the following is a payment by a firm to its shareholders from any source other than current or accumulated retained earnings?


A) Interest
B) Distribution
C) Retained earnings
D) Dividend
E) Stock repurchase

F) D) and E)
G) A) and B)

Correct Answer

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Assume that satisfied clienteles exist.Given this assumption,which one of these statements is correct?


A) A firm can increase its share price by increasing its dividend payout.
B) Dividend policy is irrelevant as long as each clientele group remains satisfied.
C) All firms will adopt a high-dividend-payout policy.
D) All dividends become irrelevant.
E) All firms should adopt a low-dividend-payout policy

F) A) and E)
G) All of the above

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The equity section of a firm's market value balance sheet has common stock of $51,000 (par value $1) ; capital surplus of $218,300; and retained earnings of $329,700.The firm's stock sells for $41 a share.If the firm repurchases $35,000 of stock,what will be the new market value of the firm's total equity?


A) $548,571
B) $578,450
C) $599,000
D) $598,146
E) $564,000

F) A) and D)
G) A) and E)

Correct Answer

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Which one of the following would tend to favor a low-dividend payout?


A) Higher tax rates on capital gains than on dividend income
B) High flotation cost for equity issues
C) Endowment fund investors who cannot spend principal
D) Investors' desire for a high-dividend yield
E) Elimination of the tax deferral on capital gains

F) C) and E)
G) C) and D)

Correct Answer

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Oak Tree Farms has common stock outstanding at a price of $13 a share.The total market value of the equity is $435,000.How many shares of stock will be outstanding if the firm does a reverse stock split of 2-for-5?


A) 9,602 shares
B) 36,000 shares
C) 13,385 shares
D) 37,500 shares
E) 83,654 shares

F) C) and D)
G) D) and E)

Correct Answer

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Which one of the following is a drawback of cash dividends?


A) Firms may have to obtain additional external financing which would not be required in the absence of the dividends.
B) Stock prices tend to increase as annual dividend amounts increase.
C) Cash dividends support stock prices.
D) Dividends tend to lower agency costs.
E) Dividend-paying firms tend to attract a wider field of investors than do non-dividend-paying firms.

F) C) and D)
G) A) and B)

Correct Answer

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On which one of the following dates are dividend checks mailed?


A) Date of record
B) Ex-dividend date
C) Payment date
D) Declaration date
E) Public announcement date

F) B) and C)
G) A) and B)

Correct Answer

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Green Thumb Nursery has11,000 shares of stock outstanding at a market price of $18 a share.The current earnings per share are $1.47.The firm has total assets of $286,000 and total liabilities of $86,000.Next week,the firm will be repurchasing $36,000 worth of stock.Ignore taxes.What will be the earnings per share after the stock repurchase?


A) $1.883
B) $1.832
C) $1.620
D) $1.797
E) $1.848

F) C) and D)
G) A) and C)

Correct Answer

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Davidson Interiors declared a dividend to holders of record on Thursday,October 15,that is payable on Monday,November 2.Suenette purchased 200 shares of Davidson Interiors stock on Monday,October 12,and Jake purchased 100 shares of this stock on the following day.Which one of the following statements is correct given this information?


A) Both Suenette and Jake will receive this dividend.
B) Suenette will receive the dividend but Jake will not.
C) Jake will receive the dividend but Suenette will not.
D) Neither Suenette nor Jake will receive this dividend.
E) You cannot determine who will or will not receive this dividend based on the information provided

F) B) and D)
G) B) and C)

Correct Answer

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