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You own 2,200 shares of Deltona Hardware.The company has stated that it plans on issuing a dividend of $0.42 a share at the end of this year and then issuing a final liquidating dividend of $2.90 a share at the end of next year.Your required rate of return on this security is 16 percent.Ignoring taxes, what is the value of one share of this stock to you today?


A) $2.30
B) $2.43
C) $2.52
D) $2.92
E) $3.32

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

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You own 1,500 shares of stock in Avondale Corporation.You will receive a $0.80 per share dividend in one year.In two years, Avondale will pay a liquidating dividend of $35 per share.The required return on Avondale stock is 16 percent.You only want $200 total in dividends in year one and accomplish this by using homemade dividends.What will your total dividend amount be in year two?


A) $35,696
B) $40,764
C) $53,660
D) $61,402
E) $63,878

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

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Automatic dividend reinvestment plans: I.require that stockholders reinvest all of the dividends to which they are entitled. II.sometimes grant shareholders the privilege of purchasing additional shares at a discounted price. III.help shareholders create their own homemade dividend policies. IV.help make corporate dividend policies irrelevant to individual stockholders.


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

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

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The dividend market is in equilibrium when:


A) all firms adopt a low dividend policy.
B) half of the firms adopt a low dividend policy and half adopt a high dividend policy.
C) all clienteles are satisfied.
D) dividends remain constant and no special dividends are declared.
E) the total amount of the annual dividends is equal to the net income for the year.

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

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The balance sheet for Apple Pie Corp.is shown here in market value terms.There are 5,000 shares of stock outstanding. The balance sheet for Apple Pie Corp.is shown here in market value terms.There are 5,000 shares of stock outstanding. The company has announced that it is going to repurchase $4,350 worth of stock.What will the price of the stock be after this repurchase? A) $35.00 B) $36.19 C) $39.21 D) $42.50 E) $43.33 The company has announced that it is going to repurchase $4,350 worth of stock.What will the price of the stock be after this repurchase?


A) $35.00
B) $36.19
C) $39.21
D) $42.50
E) $43.33

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

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On July 7, you purchased 500 shares of Wagoneer, Inc.stock for $21 a share.On August 1, you sold 200 shares of this stock for $28 a share.You sold an additional 100 shares on August 17 at a price of $25 a share.The company declared a $0.95 per share dividend on August 4 to holders of record as of Wednesday, August 15.This dividend is payable on September 1.How much dividend income will you receive on September 1 as a result of your ownership of Wagoneer stock?


A) $0
B) $190
C) $285
D) $360
E) $475

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

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Sligo Minerals stock is currently trading at $6 a share.The firm believes its primary clientele can afford to spend between $1,500 and $2,000 to purchase a round lot of 100 shares.The firm should consider a:


A) reverse stock split.
B) liquidating dividend.
C) stock dividend.
D) stock split.
E) special dividend.

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

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Steve purchased 300 shares of Alpha Beta stock on May 9.On May 15, he purchased another 300 shares and then on May 22 he purchased a final 400 shares of Alpha Beta stock.The company declared a dividend of $1.60 a share on April 30 to holders of record on Friday, May 23.The dividend is payable on June 2.How much dividend income will Steve receive on June 2 from Alpha Beta?


A) $0
B) $480
C) $960
D) $1,200
E) $1,600

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

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Kate purchased 500 shares of Fast Deliveries stock on Wednesday, July 7th.Ted purchased 100 shares of Fast Deliveries stock on Thursday, July 8th.Fast Deliveries declared a dividend on June 20th to shareholders of record on July 12th and payable on August 1st.Which one of the following statements concerning the dividend paid on August 1st is correct given this information?


A) Neither Kate nor Ted is entitled to the dividend.
B) Kate is entitled to the dividend but Ted is not.
C) Ted is entitled to the dividend but Kate is not.
D) Both Ted and Kate are entitled to the dividend.
E) Both Ted and Kate are entitled to one-half of the dividend amount.

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

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Webster United is paying a $1.10 per share dividend today.There are 350,000 shares outstanding with a market price of $25 per share.Ignore taxes.Before the dividend, the company had earnings per share of $1.74.As a result of this dividend, the:


A) retained earnings will decrease by $350,000.
B) retained earnings will increase by $385,000.
C) total firm value will not change.
D) earnings per share will increase to $2.84.
E) price-earnings ratio will be 13.74.

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

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Tucker's National Distributing has a current market value of equity of $10,665.Currently, the firm has excess cash of $640, total assets of $22,400, net income of $3,210, and 500 shares of stock outstanding.Tucker's is going to use all of its excess cash to repurchase shares of stock.What will the stock price per share be after the stock repurchase is completed?


A) $20.87
B) $20.94
C) $21.06
D) $21.33
E) $21.42

F) A) and C)
G) None of the above

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HJ Corporation has excess cash and has opted to buy some of its shares of outstanding common stock.What is this process of buying called?


A) stock dividend
B) stock split
C) stock repurchase
D) stock recap
E) stock repeal

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

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Mario's has 18,000 shares of stock outstanding with a par value of $1 per share and a market price of $4 a share.The balance sheet shows $18,000 in the common stock account, $368,000 in the paid in surplus account, and $64,000 in the retained earnings account.The firm just announced a 5-for-1 stock split.What will the paid in surplus account value be after the split?


A) $336,000
B) $368,000
C) $426,000
D) $548,000
E) $606,000

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

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Which of the following tend to keep dividends low? I.shareholders desiring current income II.terms contained in bond indenture agreements III.the desire to maintain constant dividends over time IV.flotation costs


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

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

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Which one of the following statements related to stock repurchases is correct?


A) An open market stock repurchase increases the total wealth of a shareholder if you ignore taxes, costs, and market imperfections.
B) Targeted repurchases must be offered to all shareholders but can be done in steps such that only a portion of the shareholders have the option to sell at any one point in time.
C) When a firm wishes to repurchase shares in the open market, it will do so in a special trading session that is set up by the SEC.
D) A firm may spend more cash over the course of a year on stock repurchases than it does on cash dividends.
E) Tender offer prices must be set equal to the opening market price on the day the tender offer is announced.

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

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Glendale Paving currently has 120,000 shares of stock outstanding that sell for $54 per share.Assume no market imperfections or tax effects exist.What will the new share price be if the firm declares a 40 percent stock dividend?


A) $31.12
B) $32.08
C) $35.19
D) $38.57
E) $40.00

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

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Which one of the following statements related to dividend policy is correct?


A) The primary question related to dividend policy is whether or not a firm should ever pay a dividend.
B) Both dividends and dividend policy are irrelevant.
C) Dividend policy focuses on the timing of dividend payments.
D) Homemade dividends increase the importance of a firm's dividend policy decisions.
E) Whether or not a firm ever pays a dividend is irrelevant to equity valuation.

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

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A one-for-four reverse stock split will:


A) increase the par value by 25 percent.
B) increase the number of shares outstanding by 400 percent.
C) increase the market value but not affect the par value per share.
D) increase a $1 par value to $4.
E) increase a $1 par value to $5.

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

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Which one of the following statements related to stock repurchases is correct?


A) U.S.industrial firms have increased their stock repurchases every year for each of the past twenty years.
B) A stock repurchase can be used as a means for incumbent officers to retain control of a firm.
C) A tender offer indicates that a firm is willing and able to purchase how ever many shares the current shareholders wish to sell.
D) All stock repurchases must be identified as such to the selling party.
E) Stock repurchases can be a relatively tax-efficient method of distributing cash to shareholders.

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

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The Turtle Cave currently has 160,000 shares of stock outstanding that sell for $60 per share.Assume no market imperfections or tax effects exist.What will the new share price be if the firm declares a 10 percent stock dividend?


A) $52.17
B) $54.55
C) $60.00
D) $64.50
E) $69.00

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

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