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Kaylor's Tool Shoppe has 16,000 shares of stock outstanding at a market price of $2 a share.Which one of the following stock splits should the firm declare if it wants to increase the stock price to exactly $15 a share? Ignore any taxes or market imperfections.


A) 15-for-2 stock split
B) 8-for-1 stock split
C) 1-for-7 reverse stock split
D) 2-for-15 reverse stock split
E) 1-for-8 reverse stock split

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

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The common stock of Beasley International goes ex-dividend tomorrow.The stock closed at a price of $34.65 a share today.This quarter,the company is paying a cash dividend of $0.24 a share and a liquidating dividend of $0.60 a share.Ignoring taxes and assuming that all else is held constant,what will the ex-dividend price be tomorrow morning?


A) $32.76
B) $33.00
C) $33.81
D) $33.96
E) $34.05

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

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Lay's Meat Market has 8,000 shares of stock outstanding at a price per share of $13.What will the price per share be if the firm declares a 3-for-5 reverse stock split?


A) $7.80
B) $8.50
C) $13.00
D) $15.00
E) $21.67

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

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Phil is reviewing ABC Company's dividend policy as it relates to the firm's shareholders.As part of this review,he wants to divide shareholders into two basic categories in respect to dividend payments.The first group will be shareholders who are taxed on dividend income and the second group will be shareholders who receive some form of tax break on dividend income.Which of the following types of shareholders should be placed in the tax-favored second group? I.Corporate II.Pension fund III.Individuals IV.Trust funds


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

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

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Twelve days ago,DOG,Inc.declared a dividend of $1.34 a share.The ex-dividend date is tomorrow.All else constant,which one of the following is the best estimate of DOG,Inc.'s opening stock price tomorrow?


A) $1.34 lower than today's closing price
B) Today's closing price minus an amount approximately equal to the aftertax value of the dividend
C) The same as today's closing price since the dividend is expected
D) $1.34 higher than today's closing price
E) Today's closing price plus an amount approximately equal to the aftertax value of the dividend

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

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Which one of the following statements is correct?


A) Generally speaking, the size of a firm has no effect on its tendency to pay dividends.
B) The market crash and the accounting scandals in the early 2000s tended to cause financially stable firms to cease paying cash dividends.
C) The majority of firms either started paying or increased their dividends per share in response to the May 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) B) and C)

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Which one of the following dates is the date on which the board of directors votes to pay a dividend?


A) Record date
B) Declaration date
C) Ex-dividend date
D) Payment date
E) Settlement date

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

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Blazer Sports Store is preparing to pay its quarterly dividend of $2.20 a share this quarter.The stock closed at $57.70 a share today.What will the ex-dividend stock price be if the relevant tax rate is 15 percent and all else is held constant?


A) $55.28
B) $55.50
C) $55.83
D) $55.94
E) $57.70

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

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Kelso's is considering spending $80,000 on either a stock repurchase or an extra cash dividend.Which one of the following values will be the same whether the firm pays a dividend or repurchases stock? Assume there are no taxes or market imperfections.


A) Number of shares outstanding
B) Price per share
C) Earnings per share
D) Price-earnings (PE) ratio
E) Market value of equity per share

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

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What is the difference between a tender offer and a targeted repurchase?

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A tender offer is an offer by an issuer ...

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International Traders has common stock outstanding at a market price of $53 per share.The total market value of the firm is $6,603,800.The firm plans on liquidating one of its divisions for $550,000 in cash and distributing the proceeds to the shareholders in the form of a liquidating dividend.What will be the amount per share of that dividend?


A) $3.197
B) $4.414
C) $4.620
D) $4.714
E) $4.782

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

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The owners' equity accounts for Speed Boats are shown here: The owners' equity accounts for Speed Boats are shown here: How many shares will be outstanding if the firm declares a 1-for-6 reverse stock split? A) 5,833 shares B) 9,167 shares C) 18,000 shares D) 35,000 shares E) 330,000 shares How many shares will be outstanding if the firm declares a 1-for-6 reverse stock split?


A) 5,833 shares
B) 9,167 shares
C) 18,000 shares
D) 35,000 shares
E) 330,000 shares

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

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Soul Foods recently liquidated its fast-food division.That unit represented 25 percent of the firm's overall market value.Prior to the liquidation,the firm's stock was selling for $40 a share,the annual dividend was steady at $1.30 per share,and there were 16,000 shares outstanding.The firm is preparing to distribute the entire liquidation proceeds to shareholders.How much will the liquidating dividend be per share?


A) $0.24
B) $1.30
C) $6.10
D) $7.40
E) $10.00

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

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Mary's Baked Goods has 20,000 shares of stock outstanding at a market price of $25.00 per share.What will the price per share be after the firm declares a 6 percent stock dividend? Ignore taxes and market imperfections.


A) $22.90
B) $23.58
C) $25.00
D) $25.31
E) $25.40

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

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Lexington Stables just declared a 15 percent stock dividend.Which one of the following increased by 15 percent as a result of this dividend?


A) Book value of firm's equity
B) Shareholders' wealth
C) Number of shares outstanding
D) Firm's cash balance
E) Stock price

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

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Research conducted on firms' dividend policies over time support which one of the following conclusions?


A) Aggregate dividends and stock repurchases have steadily declined in real terms.
B) Dividends are currently paid by the vast majority of firms.
C) Managers tend to smooth dividends.
D) Stock prices tend to increase whenever anticipated changes in dividends occur.
E) Firms commence paying dividends prior to doing any stock repurchases.

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

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Elkins Feed Lot is an all-equity firm with positive net income.Which one of the following will result if the firm pays a cash dividend?


A) Number of shares outstanding will increase
B) Earnings per share will decrease
C) Total assets will remain constant
D) Price-earnings ratio will decrease
E) Total equity will increase

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

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Given the current tax laws,which one of the following statements is correct?


A) Both stock repurchases and cash dividends are treated equally for tax purposes for individual shareholders.
B) Stock repurchases give individual shareholders more control over their personal taxes than do cash dividends.
C) Cash dividends are preferable to stock repurchases from the individual shareholder point of view.
D) Stock repurchases offer more tax benefits to the issuer than do cash dividends.
E) Cash dividends offer more tax benefits than do stock repurchases for the issuer.

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

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Through which of the following can a firm can reduce its number of outstanding shares? I.Open market purchase II.Rights offer III.Tender offer IV.Targeted repurchase


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

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

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

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