In the genuine world, dividendsa. Space usually an ext stable 보다 earnings.b. Fluctuate an ext widely than earnings.c. Have tendency to it is in a lower percentage of income for tires firms.d. Space usually readjusted every year to reflect revenue changes, and these transforms are randomly higher to lower, relying on whether revenue increased or decreased.e. Room usually collection as a fixed percentage of earnings, e.g., at 40% that earnings, so if EPS = $2.00, then DPS would certainly equal $0.80. When the percentage is set, then dividend plan is on "automatic pilot" and also the dividend actually paid depends strictly ~ above earnings.

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You own 100 share of Troll Brothers" stock, which currently sells for $120 a share. The agency is about to declare a 2-for-1 share split. Which of the following ideal describes your most likely position after the split?a. Friend will have actually 200 share of stock, and the share will trade at or close to $120 a share.b. Girlfriend will have actually 200 share of stock, and the stock will profession at or near $60 a share. C. Friend will have actually 100 share of stock, and also the share will trade at or close to $60 a share. D. You will have 50 share of stock, and the stock will trade at or near $120 a share. E. Girlfriend will have actually 50 shares of stock, and also the stock will trade at or near $600 a share.
Myron Gordon and also John Lintner think that the compelled return ~ above equity increases as the dividend payout proportion is lowered. Their debate is based on the presumption thata. Investors room indifferent in between dividends and capital gains.b. Investors require that the dividend productivity plus the funding gains yield same a constant. C. Resources gains are taxed in ~ a greater rate 보다 dividends.d. Investors check out dividends together being less risky 보다 potential future funding gains.e. Investors choose a disagreement of expected capital gains to a dollar of expected dividends because of the lower tax price on capital gains.
Your firm adheres strictly come the residual dividend model. Every else equal, i m sorry of the following factors would be most likely to lead to rise in the firm"s dividend every share?a. The firm"s net revenue increases.b. The company increases the percentage of same in the target capital structure.c. The number of profitable potential tasks increases.d. Congress lowers the tax rate on capital gains, leave the remainder of the taxes code unchanged. E. Income are unchanged, but the certain issues new shares of usual stock.
f a firm adheres strictly come the residual dividend policy, and also if the optimal capital budget plan requires the use of all earnings for a provided year (along with new debt according to the optimal debt/assets ratio), then the firm have to paya. The very same dividend as it payment the former year.b. No dividends to common stockholders.c. Dividends only out that funds elevated by the sale of new common stock.d. Dividends only out of funds elevated by get loan money (i.e., issuing debt). E. Dividends only out that funds elevated by selling off addressed assets.
f a certain adheres strictly come the residual dividend model, the issuance of brand-new common share would indicate that a. The dividend payout ratio has actually remained constant.b. The dividend payout ratio is increasing.c. No dividends will certainly be paid during the year.d. The dividend payout ratio is decreasing.e. The dollar lot of resources investments had actually decreased.
Which the the complying with does NOT typically influence a firm"s dividend plan decision?a. The firm"s capability to advice or hold-up investment tasks without disadvantage consequences.b. A strong preference by most of its shareholder for current cash income versus potential future capital gains.c. Constraints enforced by the firm"s bond indenture.d. The truth that much of the firm"s devices is leased quite than bought and also owned.e. The reality that congress is considering alters in the tax law regarding the taxation of dividend versus funding gains.
Which that the adhering to would it is in most likely to result in a decrease in a firm"s dividend payout ratio?a. Its earnings become much more stable.b. Its access to the capital markets increases.c. Its research study and advancement efforts pay off, and also it now has much more high-return investment opportunities.d. Its accounts receivable decrease because of a readjust in its credit policy.e. Its stock price has actually increased over the last year by a greater percentage than the increase in the broad stock sector averages.
c. Its study and breakthrough efforts pay off, and also it currently has an ext high-return investment opportunities.
37. I m sorry of the following statements is CORRECT?a. As soon as firms space deciding ~ above the size of stock splits--say whether to declare a 2-for-1 break-up or a 3-for-1 split, that isbest to explain the smaller sized one, in this situation the 2-for-1 split, due to the fact that then the after-split price will certainly be higher than if the 3-for-1 separation had been used.b. Ago before the SEC was created in the 1930s, suppliers would declare reverse splits in order to boost their stock prices. However, this was figured out to it is in a deceptive practice, and also reverse splits are illegal today.c. Share splits create much more administrative troubles for investors 보다 stock dividends, particularly determining the tax basis of your shares when they decide to sell them, so this particular day stock dividends are offered far more often than stock splits.d. As soon as a firm declares a share split, the price that the stock commonly declines--for example, by around 50% ~ a 2-for-1 split--and this necessarily reduces the complete market worth of the firm"s equity.e. If a firm"s stock price is rather high loved one to most stocks--say $500 per share--then it can declare a stock break-up of speak 20-for-1 so as to bring the price under to other close come $25. Moreover, if the price is fairly low--say $2 every share--then it have the right to declare a "reverse split" of say 1-for-10 so regarding bring the price approximately somewhere about $20 every share.
If a firm"s share price is quite high relative to many stocks--say $500 per share--then it have the right to declare a stock break-up of to speak 20-for-1 so as to bring the price under to something close come $25. Moreover, if the price is reasonably low--say $2 every share--then it have the right to declare a "reverse split" of to speak 1-for-10 so regarding bring the price up to somewhere approximately $20 every share.
Which of the complying with statements about dividend policies is CORRECT?a. Miller and Modigliani said that investors prefer dividends to resources gains due to the fact that dividends are morecertain than capital gains. They call this the "bird-in-the-hand" effect.b. One factor that carriers tend to favor distributing overfill cash as dividends rather than by repurchasing share is the dividends are typically taxed in ~ a lower rate 보다 gains ~ above repurchased stock.c. One advantage of dividend reinvestment plan is the they allow shareholders to delay paying count on the dividends the they pick to reinvest.d. One an essential advantage of the residual dividend model is the it allows a company to monitor a secure dividend policy.e. The clientele effect says that companies should follow a stable dividend policy.
Which that the adhering to statements is CORRECT?a. One disadvantage that dividend reinvestment plan is the they rise transactions prices for investor whowant to rise their investment in the company.b. One benefit of dividend reinvestment plans is that they permit investors come postpone paying taxes top top the dividends credited to their account.c. Share repurchases can be provided by a for sure that wants to rise its debt ratio.d. Stock repurchases make feeling if a company expects to have actually a lot of of rewarding new tasks to money over the next few years, detailed investors are aware of these invest opportunities.e. One advantage of one open industry dividend reinvestment plan is that it provides new equity capital and increases the shares outstanding.
Which the the complying with statements is CORRECT?a. Under the tax regulations as they exist in 2015, a dollar received by an individual taxpayer as interest revenue is taxation at the same price as a dollar got as dividends.b. One nice attribute of dividend reinvestment plan (DRIPs) is that they reduce the taxes investor would need to pay if they obtained cash dividends.c. Empirical research indicates that, in general, companies send a negative signal to the marketplace when they announce rise in the dividend. Together a result, re-publishing prices loss when dividend rises are announced because investors analyze the increase as a signal that the firm expects fewer an excellent investment methods in the future.d. If a firm needs come raise brand-new equity capital, a new-stock dividend reinvestment arrangement would do sense. However, if the for sure does not need brand-new equity, climate an open industry purchase dividend reinvestment setup would probably make an ext sense.e. Dividend reinvestment plans have actually not recorded on in most industries, and today end 99% of all DRIPs are available by utilities.
d. If a firm needs come raise new equity capital, a new-stock dividend reinvestment setup would make sense. However, if the certain does no need brand-new equity, climate an open industry purchase dividend reinvestment setup would probably make more sense.
Which of the following statements is CORRECT?a. Historically, the taxation code has motivated companies to pay dividends rather than maintain earnings.b. If a agency uses the residual dividend version to identify its dividend payments, dividend payout will have tendency to boost whenever its lucrative investment methods increase relatively rapidly.c. The an ext a firm"s monitoring believes in the clientele effect, the much more likely the for sure is come adhere strictly come the residual dividend model.d. Big stock repurchases financed by debt have tendency to increase expected revenue per share, yet they also tend to boost the firm"s jae won risk.e. A disagreement paid the end to repurchase stock has actually the exact same tax advantage as a disagreement paid the end in dividends. Thus, both companies and investors have to be indifferent in between distributing cash through dividends and also stock repurchase programs.
d. Large stock repurchases financed by debt often tend to boost expected revenue per share, but they additionally tend to boost the firm"s gaue won risk.
Which the the adhering to statements is CORRECT?a. If a firm has a 2-for-1 share split, its share price should around double.b. Capital gains earned on share repurchased are taxed less favorably than dividends, i beg your pardon is why companies frequently pay dividends and also avoid re-publishing repurchases.c. An extremely often, a company"s stock price will certainly rise once it announces that it plans to commence a re-publishing repurchase program. Together an announcement might lead to a share price decline, but this does not typically happen.d. Stock repurchases increase the number of outstanding shares.e. The clientele impact is the best explanation for why suppliers tend to differ their dividend payment from 4 minutes 1 to quarter.
c. Very often, a company"s share price will certainly rise as soon as it announces the it plans to commence a share repurchase program. Such an announcement can lead come a stock price decline, however this does not usually happen.
Which of the following statements is CORRECT?a. Firms through a many of great investment opportunities and also a reasonably small quantity of cash have tendency to have above-average dividend payout ratios.b. One advantage of the residual dividend model is that it leader to a steady dividend payout, which investor like.c. Rise in the share price as soon as a company cuts that is dividend is constant with signaling concept as postulated by MM.d. If the "clientele effect" is correct, then for a firm whose revenue fluctuate, a plan of paying a constant percentage that net earnings will most likely maximize its share price.e. Stock repurchases make the most sense in ~ times when a company believes its stock is undervalued.
Which that the adhering to statements is CORRECT?a. One advantage of dividend reinvestment plans is the they enable investors to protect against paying counting on thedividends lock receive.b. If a firm has an developed clientele of investor who choose a high dividend payout, and if management wants to keep stockholders happy, it have to not adhere strictly to the residual dividend model.c. If a certain adheres strictly to the residual dividend model, then, holding all else constant, the dividend payout ratio will often tend to increase whenever that investment opportunities improve.d. If conference eliminates counting on capital gains however leaves the an individual tax rate on dividend unchanged, this would certainly motivate providers to increase their dividend payout ratios.e. Regardless of its drawbacks, complying with the residual dividend design will tend to stabilize really cash dividends, and this will make it less complicated for this firm to tempt a clientele that prefers high dividends, such together retirees.
b. If a agency has an created clientele of investor who like a high dividend payout, and if management wants to save stockholders happy, it must not adhere strictly to the residual dividend model.
Firm M is a mature agency in a tires industry. Its annual net income and also cash operation are continuously high and stable. However, M"s development prospects are fairly limited, so its capital budget plan is small relative to its network income. For sure N is a relatively new company in a brand-new and growing industry. The markets and also products have not stabilized, therefore its annual operating revenue fluctuates considerably. However, N has considerable growth opportunities, and its capital spending plan is meant to be large relative come its net earnings for the foreseeable future. Which of the adhering to statements is CORRECT?a. Firm M probably has a lower target debt proportion than certain N.b. Certain M probably has a greater target dividend payout proportion than for sure N.c. If the this firm tax rate increases, the debt ratio of both this firm is likely to decline.d. The two firms space equally likely to pay high dividends.e. Certain N is likely to have a clientele of shareholder who desire a consistent, secure dividend income.
Which the the complying with statements is CORRECT?a. If a for sure repurchases some of its share in the open up market, climate shareholders who sell their stock for much more thanthey paid for it will be subject to capital gains taxes.b. An open-market dividend reinvestment arrangement will be many attractive to carriers that need brand-new equity and would otherwise need to issue extr shares of usual stock through investment bankers.c. Stock repurchases have tendency to minimize financial leverage.d. If a agency declares a 2-for-1 share split, its share price should around double.e. One advantage of adopting the residual dividend model is that this makes it much easier for corporations to satisfy the requirements of Modigliani and Miller"s dividend clientele theory.
a. If a certain repurchases few of its share in the open up market, climate shareholders who sell their share for much more thanthey paid for it will certainly be topic to capital gains taxes.
Which the the following actions will best enable a company to raise extr equity capital, various other things held constant?a. Refund long-term debt v lower expense short-term debt.b. Explain a share split.c. Start an open-market purchase dividend reinvestment plan. D. Begin a share repurchase program.e. Start a new-stock dividend reinvestment plan.
Which that the complying with statements is not CORRECT?a. Stock repurchases have the right to be provided by a certain as part of a setup to change its resources structure.b. ~ a 3-for-1 share split, a company"s price every share need to fall, but the number of shares impressive will rise.c. Investors may analyze a share repurchase routine as a signal that the firm"s managers believe the share is undervalued, or, alternatively, as a signal that the firm does not have actually many an excellent investment opportunities.d. A company can repurchase share to distribute a huge one-time cash inflow, to speak from the revenue of a division, to shareholder without having actually to increase its constant dividend.e. Shareholder pay no revenue tax on dividend if the dividends are offered to purchase stock through a dividend reinvestment plan.
e. Shareholder pay no earnings tax on dividend if the dividends are supplied to purchase stock with a dividend reinvestment plan.
Which that the complying with statements is CORRECT?a. If a firm follows the residual dividend model, climate a sudden boost in the number of lucrative projectswould be most likely to lead to a reduction of the firm"s dividend payout ratio.b. The clientele effect describes why so numerous firms change their dividend plans so often.c. One benefit of adopting the residual dividend version is the this policy makes it easier for a coporation, group to lure a details and well-identified dividend clientele.d. New-stock dividend reinvestment plans are similar to stock dividends due to the fact that they both rise the number of shares outstanding however don"t adjust the firm"s full amount of publication equity.e. Investor who receive stock dividends must pay count on the worth of the brand-new shares in the year the stock dividends are received.
a. If a firm follows the residual dividend model, then a sudden increase in the number of profitable projectswould be most likely to lead to a palliation of the firm"s dividend payout ratio.
Which that the complying with statements is CORRECT?a. Expect a certain that has actually been earning $2 and also paying a dividend that $1.00, or a 50% dividend payout, announcesthat it is increasing the dividend come $1.50. The stock price then jumps from $20 come $30. Some world would argue the this is proof that investors choose dividends to preserved earnings. Miller and also Modigliani would certainly agree v this argument.b. Other things held constant, the greater a firm"s target dividend payout ratio, the higher its expected growth rate must be.c. Miller and also Modigliani"s dividend irrelevance theory says that the portion of its earnings that a firm pays out in dividends has actually no impact on its price of capital, however it does affect its stock price.d. The federal federal government sometimes counting dividends and also capital benefit at various rates. Other things organized constant, an increase in the tax price on dividends loved one to that on funding gains would logically result in a to decrease in dividend payout ratios.e. If investors prefer firms that retain most of their earnings, then a firm that wants to maximize its stock price should collection a high dividend payout ratio.

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d. The federal federal government sometimes counting dividends and also capital benefit at various rates. Other things hosted constant, boost in the tax rate on dividends loved one to that on capital gains would certainly logically lead to a decrease in dividend payout ratios.
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