Question 1

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

Accepted Answer

The answer of What is the difference between a tender...

Question 2

What are the differences between a regular cash dividend, a liquidating dividend, a special dividend, and an extra cash dividend?

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Question 3

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.

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Question 4

Explain why a firm might prefer a stock repurchase rather than an increase in the firm's regular dividend.

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Question 5

Tattler, Inc. has declared a $4.60 per share dividend. Suppose capital gains are not taxed, but dividends are taxed at 20 percent. New IRS regulations require that taxes be withheld at the time the dividend is paid. Tattler sells for $87 per share, and the stock is about to go ex-dividend. What do you think the ex-dividend price will be?

Accepted Answer

After-tax dividend = $4.60 (1-.20) = $3.68$87 - 3.68 = $83.32.

Question 6

Explain how the process of dividend smoothing affects the dividend growth rate as compared to the earnings growth rate.

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Question 7

The owners' equity accounts for Speed Boats are shown here:

Accepted Answer

The question does not provide enough information to determine the number of shares in the owners' equity accounts. Therefore, the correct answer is B, as none of the other choices are relevant to the question.

Question 8

LOG, Inc. currently has 300,000 shares of stock outstanding that sell for $73 per share. Assuming no market imperfections or tax effects exist, what will the share price be after LOG has a five-for-three stock split?

Accepted Answer

In a five-for-three stock split, each share is split into 5/3 shares. The total number of shares increases, but the total market value remains the same. Thus, the new share price is (3/5) * $73 = $43.80.

Question 9

The owners' equity accounts for Boats and More are shown here:  Assume Boats and More stock currently sells for $38 per share and a 10 percent stock dividend is declared. What will be the new common stock account value?

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Question 10

You are having a discussion with one of your classmates on dividend policy. Your classmate states that dividend policy is totally irrelevant. Write a response to this statement justifying that in the real-world dividend policy does matter.

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Question 11

Your portfolio is 240 shares of Rising Sun Co. The stock currently sells for $62 a share. The company has announced a dividend of $1.10 per share with an ex-dividend date of May 6. Assume there are no taxes. What will your portfolio value be on May 7?

Accepted Answer

First, calculate the total value of the portfolio:
240 shares x $62 per share = $14,880

Next, calculate the total dividend payment:
240 shares x $1.10 per share = $264

On the ex-dividend date, the stock price typically falls by the amount of the dividend. So, the stock price will likely drop from $62 to $60.90 ($62 - $1.10).

Finally, calculate the new value of the portfolio:
240 shares x $60.90 per share = $14,616

Adding the dividend payment to the new portfolio value:
$14,616 + $264 = $14,880

Therefore, the portfolio value on May 7 will be $14,880, which is option B.

Quiz 14: Dividends and Dividend Policy