[財管] HW7 Dividend Policy

1. Anyone who purchases the stock on or after the ________ date will not receive the dividend. (A) distribution (B) record (C) ex-dividend (D) declaration

2. A(n) ________ is the most common way that firms repurchase shares. (A) targeted repurchase (B) Dutch auction share repurchase (C) tender offer (D) open market share repurchases

3. Taggart Transcontinental has announced a $2 dividend. If Taggart's last price cum-dividend is $45, then, assuming perfect capital markets, what should its first ex-dividend price be? (A) $0 (B) $2 (C) $43 (D) $45

4. Wyatt Oil has assets with a market value of $600 million, $70 million of which are cash. It has debt of $250 million, and 20 million shares outstanding. Assume perfect capital markets. If Wyatt Oil distributes the $70 million as a dividend, then its stock price after the dividend will be closest to: (A) $12.50 (B) $14.00 (C) $17.50 (D) $26.50

5. Wyatt Oil has assets with a market value of $600 million, $70 million of which are cash. It has debt of $250 million, and 20 million shares outstanding. Assume perfect capital markets. If Wyatt Oil distributes the $70 million as a share repurchase, then its stock price after the share repurchase will be closest to: (A) $11.00 (B) $12.50 (C) $14.00 (D) $17.50

6. Which of the following lists events in chronological order from earliest to latest? (A) Date of Record, Declaration Date, Ex-Dividend Date (B) Date of Record, Ex-Dividend Date, Declaration Date (C) Declaration Date, Date of Record, Ex-Dividend Date (D) Declaration Date, Ex-Dividend Date, Date of Record

7. The indifference proposition regarding dividend policy: (A) assumes that tax rates increase at the same rate as inflation. (B) states that investors are indifferent about the timing of dividend payments. (C) states that investors are indifferent between stock dividends and cash dividends. (D) states that investors are indifferent between stock repurchase and cash dividends.

8. Which of the following statements is not true? (A) Dividend payments but not capital gains are costs to the firm. (B) Stockholder's expected return equals the firm's cost of equity. (C) Payments to current stockholders are the implicit cost of the infusion of new equity capital. (D) The security market line provides information as to the cost of equity for a firm.

9. The increase in the stock price after a dividend increase is called the information content effect because: (A)the change in dividend was expected by shareholders. (B) the dividend increase signaled investors to adjust the expectations of future earning upward. (C) the dividend change signaled investors to adjust the risk of the firm downward. (D) the dividend change signaled shareholders that the firm could now payout more as they enter the mature phase of their business.

10. On what date the stock price is likely to fall about the value of the dividend? (A) Record date, (B) payment date, (C) ex-dividend date, (D) Declaration date.

11. Following the previous question, because of tax the price drop is usually than the dividends. (A) larger. (B) smaller. (C) the same as (D) cannot be decided.

12. A dividend is usually a cash distribution from: (A) current earnings or accumulated retained earnings (B) the capital surplus account (C) common stock account (D) liquidated capital

13. The most important difference between stock repurchases and cash dividend is that they (A) benefit different groups. (B) have different effects on corporate cash flow. (C) have different effects on current stock price. (D) may have different tax consequences.

14. In an efficient market, ignoring taxes and time value, (A)the price of stock should decrease by the amount of the dividend immediately on declaration date. (B)the price of stock should decrease by the amount of the dividend immediately on ex-dividend date. (C)the price of stock should increase by the amount of the dividend immediately on declaration date. (D)the price of stock should increase by the amount of the dividend immediately on ex-dividend date.

15. Which of the following statements concerning dividends is not true? (A) Dividends are irrelevant. (B)Dividend policy is argued by M&M to be irrelevant.

16. Even if both dividends and capital gains are currently taxed at the same ordinary income tax rate, the effect of the tax is different because: (A) capital gains are actually taxed, while dividends are taxed on paper only. (B) dividends are actually taxed, while capital gains are taxed on paper only. (C) dividends are taxable when distributed while capital gains are deferred until the stock is sold. (D) capital gains are taxable when distributed while dividends are deferred until the stock is sold.

17. Which of the following statements is FALSE? (A) Unlike with capital structure, taxes are not an important market imperfection that influence a firm's decision to pay dividends or repurchase shares. (B) If dividends are taxed at a higher rate than capital gains, which has been true until the most recent change to the tax code, shareholders will prefer share repurchases to dividends. (C) Shareholders typically must pay taxes on the dividends they receive. They must also pay capital gains taxes when they sell their shares. (D) Because long-term investors can defer the capital gains tax until they sell, there is still a tax advantage for share repurchases over dividends.

18. If dividends are taxed at higher rates than are capital gains, then high dividend payout stocks should sell at lower prices, everything else equal, compared to low dividend paying stocks. One implication of this is that investors in _____tax brackets will tend to prefer high dividend payout stocks. (A) very high (B) slightly higher than average (C) zero (D) slightly lower than average

19. Which of the following statements is not true? (A)Dividend payments but not capital gains are costs to the firm. (B) Stockholder's expected return equals the firm's cost of equity. (C) Payments to current stockholders are the implicit cost of the infusion of new equity capital. (D) The security market line provides information as to the cost of equity for a firm

20. If stockholders care about taxes, then stocks should attract clienteles based on dividend yields. Surveys support this by showing that the highest dividend yield stocks are held by investors in the: (A)highest tax bracket. (B)average tax bracket. (C) lowest tax bracket. (D) next to highest tax bracket.

Sol:

1. C

2. D

3. C

4. B

5. D

6. D

https://wiki.mbalib.com/wiki/%E8%82%A1%E5%88%A9%E6%94%BF%E7%AD%96

7. B

8. A

9. B

10. C

11. B

12. A

13. D

14. B

15. B

16. C

17. A

18. D

19. A

20. C