FIN 380 Chapter Notes - Chapter 15: Dividend, Dividend Policy, Dividend Yield

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sapphiregnat826

30 Mar 2017

School

Quinnipiac University

Department

Finance

Course

FIN 380

Professor

Mancini

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Document Summary

Distributions to shareholders: dividends and repurchases distribution policy - the policy that sets the level of distributions and the form of the distributions (dividends and stock repurchases). The source of fcf depends on a company"s investment opportunities and its effectiveness in turning those opportunities into realities. 5 goods ways to use cash:" (1) pay interest expenses (after tax), (2) pay down the principal on debt, (3) pay dividends, (4) repurchase stock, (5) buy short-term investments or other nonoperating assets. This date was established by stockbrokers to avoid confusion, and it is 2 business days prior to the holder-of-record date. Stock repurchase - occurs when a firm repurchases its own stock. These shares of stock are then referred to as treasury stock. In this case, the firm generally indicates it will buy up to a specified number of shares within a stated time period (usually about two weeks).

Related Questions

Dividend payment procedures Wood Shoes, at the quarterly dividend meeting, declared a cash dividend of $1.10 per share for holders of record on Monday, July 10. The firm has 300,000 shares of common stock outstanding and has set a payment date of July 31. Prior to the dividend declaration, the firmâs key account were as follows:

Cash $500,000 Dividends payable $ 0

Retained earnings 2,500,000

a. Show the entries after the meeting adjourned.

b. When is the ex dividend date?

c. After the July 31 payment date, what values would the key accounts have?

d. What effect, if any, will the dividend have on the firmâs total assets?

e. Ignoring general market fluctuations, what effect, if any, will the dividend have on the firmâs stock price on the ex dividend date?

mauvewalrus665

Please show work if possible!

The residual dividend theory suggests that dividends should be paid to stockholders first and then what is left can be reinvested by the firm.
True.
False.

An investor purchased 300 shares of ABC Inc. stock on Wednesday, December 16. ABC paid its quarterly dividend of $1.10 a share on Thursday, December 31. The record date was Friday, December 18. How much dividend income did the investor receive on December 31 from his investment in JLK stock?
$0.00
$110
$165
$330

The higher the dividend payout ratio, the more a company must rely on external financing.
True
False

Which of the following transactions will increase a corporation's retained earnings?

stock repurchase
stock split
stock dividend
none of the above

JBC Corp. declared a dividend of $2 per share, which was an increase of 25% from the prior year, yet JBC Corp. stock declined by 3% the day of the announcement. RBG Corp. declared a dividend of $2 per share, which was the same as the prior year, and its stock increased in value by 2% on the day of the announcement. These events could be most readily explained by the _________
Information effect.
Residual dividend theory.
Clientele effect.
Expectations theory.

Which one of the following is probably the best argument in favor of a reverse stock split?
to lower the current stock price to its normal trading range
to provide additional shares to all its shareholders
to avoid delisting
to increase the value of the firm

The ex-dividend date is ________ the holder of record date.
2 days before.
5 days before.
2 weeks before.
3 days after.

Edwards Enterprises currently has 145,000 shares of stock outstanding at a market price per share of $57. Today, the firm announced a 3-for-2 stock split. What will the price per share be after the split?
$19.00
$38.00
$47.20
$85.50

Books and More currently has 75,000 shares of stock outstanding, net income of $46,000, and a PE ratio of 18.7. What will the firm's PE ratio be if the firm repurchases 15,000 shares? Assume all else remains constant.
12.67
13.08
14.96
20.23

John owns 1000 shares of stock in Zebar Corporation with a market value of $2,000. Zebar declares a 10% stock dividend. After the dividend is paid, John owns____________

1100 shares with a market value of $2,200.
1000 shares with a market value of $2,200.
1100 shares with a market value of $2,000.
1100 shares with a market value of $2,100.

scarletsea-lion205

Which one of the following statements about common stock is correct?

A. Firms tend to repurchase shares of their outstanding stock when they view the shares as undervalued.

B. Treasury stock is a means of increasing the number of shares outstanding.

C. Transaction costs cannot be expected to significantly reduce the rate of return on stock investments.

D. Common stock gives stockholders first title to a share of the company's earnings, prior to other corporate obligations.

----

Tiffany owned 1000 shares of GIA stock which was selling for $1.50 per share when the company declared a 1 for 10 reverse split. After the split, Tiffany owned

A. 10,000 shares worth approximately $1.50 per share.

B. 10,000 shares worth approximately $0.15 per share.

C. 100 shares worth approximately $15 per share.

D. 100 shares worth approximately $1.50 per share.

----

Westlake Industries has total assets of $42.5 million, total debt of $29.3 million, and $2.4 million of 6% preferred stock outstanding. If the company has 250,000 shares of common stock outstanding, its book value per share would be

A. $32.33.

B. $33.60.

C. $43.20.

D. $52.80.

---

The Limberger Corporation declared a quarterly dividend of $0.10 per share. The ex-dividend date was July 15, the date of record was July 18, and the payment date was July 28. If you had owned 100 shares of the Limberger Corporation and sold them on July 15, then

A. you would collect $10.00 in dividends, and the purchaser would not collect any dividends.

B. the purchaser would collect $10.00 in dividends, and you would not collect any dividends.

C. you would collect $5.00 in dividends, and the purchaser would collect $5.00 in dividends.

D. neither you nor the purchaser would collect any money in dividends.

----

Pilgrim Corp. stock currently sells for $25 per share? The dividend yield is $1.00 per share and earnings per share are $3.00. The dividend yield is ________ and the the dividend payout ratio is ________.

A. 12%, .48%

B. 8.33%, 25%

C. 4%, 33%

D. 33%,4%.

----

A high current ratio can tell us that the company ________.

A. should be able to cover the current liabilities

B. should be able to keep away from short-term cash problems

C. may have too much capital tied up in current assets

D. All of the above

E. Only A and B

----

Which of these statements is true?

A. For a company to remain in business for the long term, cash flow from investing activities and financing activities must generally be positive numbers.

B. A company may appear to be profitable on its income statement, but fail to generate strong cash flows.

C. The statement of cash flows is used to assess a company's long-term solvency.

D. The income statement reflects the amount of cash available for investment and financing activities.

----

A company has sales of $640,000, net profit after taxes of $23,000, and a total asset turnover of 2.5. What is the return on assets?

A. 3.6%

B. 4.5%

C. 8.1%

D. 9.0%

----

The Merry Co. has current annual sales of $350,000 and a net profit margin of 6%. Sales are expected to increase by 5% annually while the profit margin is expected to remain constant. What is the projected after-tax earnings for two years from now?

A. $19,294
B. $22,050
C. $23,100
D. $23,153 ----

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FIN 380 Chapter Notes - Chapter 15: Dividend, Dividend Policy, Dividend Yield

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