Chapter 17 Dividends and Payout Policy

Student name:
1) You own 340 shares of stock in Halestorm, Incorporated, that currently sells for $84.85
per share. The company has announced a dividend of $3.85 per share with an ex-dividend date of
February 4. Assuming no taxes, what is the value of the stock on February 4?
1)


A) $82.92
B) $88.70
C) $79.95
D) $81.00
E) $84.85



Question Details
Difficulty : 1 Basic
Topic : Cash dividends
Learning Objective : 17-01 Define dividend types and how dividends are paid.
Section : 17.1 Cash Dividends and Dividend Payment
AACSB : Analytical Thinking
Accessibility : Keyboard Navigation
Accessibility : Screen Reader Compatible
Bloom's : Understand




2) You own 100 shares of stock in Green Mild Chili Peppers, Incorporated, that currently
sellfor $47.45 per share. The company has announced a dividend of $1.81 per share with an ex-
dividend date of May 3. Assuming no taxes, what is the value of your portfolio on May 3?
2)


A) $4,839.00
B) $4,564.00
C) $181.00
D) $4,745.00
E) $4,420.00

,Question Details
Difficulty : 1 Basic
Topic : Cash dividends
Learning Objective : 17-01 Define dividend types and how dividends are paid.
Section : 17.1 Cash Dividends and Dividend Payment
AACSB : Analytical Thinking
Accessibility : Keyboard Navigation
Accessibility : Screen Reader Compatible
Bloom's : Understand




3) A company has declared a dividend of $7.35 per share on its stock. Capital gains are not
taxed. Suppose the IRS has issued a new regulation that requires taxes of 15 percent be withheld
at the time the dividend is paid. The stock currently sells for $119.95 per share. What will the ex-
dividend price be?
3)


A) $113.70
B) $118.85
C) $112.60
D) $116.28
E) $119.95



Question Details
Difficulty : 1 Basic
Topic : Cash dividends
Learning Objective : 17-01 Define dividend types and how dividends are paid.
Section : 17.1 Cash Dividends and Dividend Payment
AACSB : Analytical Thinking
Accessibility : Keyboard Navigation
Accessibility : Screen Reader Compatible
Bloom's : Understand




4) The stock of Red's Hardware closed at $58.10 per share today. Tomorrow morning, the
stock goes ex-dividend, paying a dividend of $1.90 per share. The tax rate on dividends is 25
percent. All else the same, what price will the stock open at tomorrow morning?
4)

, A) $56.20
B) $56.68
C) $58.10
D) $57.63
E) $57.15



Question Details
Difficulty : 1 Basic
Topic : Cash dividends
Learning Objective : 17-01 Define dividend types and how dividends are paid.
Section : 17.1 Cash Dividends and Dividend Payment
AACSB : Analytical Thinking
Accessibility : Keyboard Navigation
Accessibility : Screen Reader Compatible
Bloom's : Understand




5) A firm has a market value equal to its book value. Currently, the firm has excess cash of
$6,000 and other assets of $15,000. Equity is worth $21,000. The firm has 200 shares of stock
outstanding and net income of $1,600. What will the stock price per share be if the firm pays out
its excess cash as a cash dividend?
5)


A) $20
B) $83
C) $91
D) $28
E) $75



Question Details
Difficulty : 1 Basic
Topic : Cash dividends
Learning Objective : 17-01 Define dividend types and how dividends are paid.
Section : 17.1 Cash Dividends and Dividend Payment
AACSB : Analytical Thinking
Accessibility : Keyboard Navigation
Accessibility : Screen Reader Compatible
Bloom's : Understand

, 6) Bowzer Company has just received $4.2 million from the sale of one of its divisions. The
company has 450,000 shares outstanding that sell for $86.23 per share. If the company issues the
entire proceeds from the sale as a special dividend, what will the ex-dividend stock price be?
Ignore taxes.
6)


A) $86.23
B) $76.90
C) $95.56
D) $86.12
E) $78.82



Question Details
Difficulty : 1 Basic
Topic : Cash dividends
Learning Objective : 17-01 Define dividend types and how dividends are paid.
Section : 17.1 Cash Dividends and Dividend Payment
AACSB : Analytical Thinking
Accessibility : Keyboard Navigation
Accessibility : Screen Reader Compatible
Bloom's : Understand




7) Storico currently has 37,000 shares outstanding that sell for $48.18 per share. The
company plans to issue a stock dividend of 15 percent. How many new shares will be issued?
7)


A) 37,000 shares
B) 42,550 shares
C) 5,800 shares
D) 5,550 shares
E) 5,690 shares