Financial management 2 final

You currently own 200 shares of stock valued at $6 per share. If the firm declares a 1 for 4 reverse stock dividend you will own _____ shares valued at ______ per share

50: $24

Which method of share repurchase requires investors to submit bids and the companies to take the lowest ones, in sequence

auction repurchase

a stock goes ex-dividend

one business day prior to the record date

what would you expect to happen to the price of a share of stock on the day it goes ex dividend if you ignore taxes+ The price should

decrease by the amount of the dividend

which one of these is the most common method of share repurchase

open market repurchase

boards of directors may be legally restricted in their declaration of dividends if

the dividend would create a situation of insolvency

ABC corporation stock is selling for $46 per share when a 10% stock dividend is declared. If you own 260 shares of ABC corporation then you will receive

26 shares of ABC corporation

an investor owns 5,000 shares, which is 1% of a corporation’s outstanding stock before a stock repurchase. the investor did not sell any of his stock during the 25000 share repurchase.

the investor owns more than 1% of the corporation ma

managers tend to only increase dividends

when they believe the increased amount can be sustained

a policy of dividend “smoothing” refers to

maintaining a steady progression of dividend increases over time

what is the new share price for a corporation with a current share price of $4 that employs a 2 for 9 reverse split

$18

MM’s propositions of dividend irrelevance depends upon

the efficiency of capital markets

based on the dividend growth model, a lower current payout will not affect the stock price, provided that the

reduction is offset by an increase in the growth rate

why are dividend changes rather than the absolute level of dividends perceived to be more important to managers and shareholders

dividend changes are thought to signal future expectations

an increase in share price following an increase in dividends is logical if the

increased dividend signals higher future earnings

which one of these parties is most likely to prefer a stock with a higher dividend payout policy

retired individuals

a company is more likely to repurchase stock rather than pay out dividends when the firm

wants to avoid a commitment for future distributions

with respect to the dividend payment process, the price of a share of stock can logically be expected to drop on

the ex dividend date

automatic dividend reinvestment plans allow firms to

reduce their cash outflow to shareholders

when a corporation engages in a 10% stock repurchase it

purchases for cash 10% of the outstanding shares

assuming no market imperfections, which one of the following will not be affected by a repurchase of shares

price per share

assuming no market imperfections, which one of the following would not be expected to have an effect on share price

stock repurchase

MM’s proposition concerning dividends contends that shareholders will

not offer higher prices for higher dividend payouts

which one of the following is the order in which key dividend dates occur

declaration, ex-dividend, record, payment

a corporation that has an automatic reinvestment plan

gives shareholders the option to re-invest the dividend in additional shares

the primary purpose of laws prohibiting a firm from paying dividends that include its legal capital is to

prevent managers from paying out a substantial proportion of the firm’s assets

the dividend increase may be used as ___ of a firm’s ___

signal: good prospects