Exam (elaborations) MBA MKT640

MKT 640 / MKT640 DIVIDEND POLICIES Question 1 If a firm is taxed at 40% and an individual is in the 15% dividend tax bracket what is the total amount per $1 of earnings an investor receives as a result of a double taxation environment? (round to the hundredth) . $0.51 Question 2 A _____ is intended to be paid periodically in equal amounts recurring over time. liquidating dividend extra dividend special dividend regular dividend Question 3 A stable dividend policy should not mean ______ but instead payments that are____. fixed payments - growing at a stable rate fixed payments - paid at a stable rate timely payments - paid at a stable rate variable payments - paid at a stable rate Question 4 Investors who are concerned with how a firm manages retained earnings would encourage which dividend policy? a policy that aims to achieve the lowest payout possible stable dividend policy a policy that aims to achieve the highest payout possible target payout ratio Question 5 If a firm has _____ flotation costs they will be _____ to issue dividends. variable – more likely high - less likely high – more likely low - less likely Question 1 A _____ is intended to be paid periodically in equal amounts recurring over time. liquidating dividend special dividend regular dividend common dividend Question 2 Which of the following is not a common way for firms to distribute earnings? repurchase shares from employee plans make capital expenditures repurchase shares on the market pay earnings to shareholders in the form of dividends Question 3 If a firm _____ their dividend policy the market will _____. (choose 2) negatively alters – respond positively eliminates – respond positively eliminates – respond negatively positively alters – respond positively Question 4 The Firm is financed with 40% debt 60% equity. If they are expecting a capital expense of $600,000 over the next year what should be amount distributed as dividends when using the residual dividend approach. (round to whole dollar) . 240,000 Question 5 If a firm has _____ flotation costs they will be _____ to issue dividends. high – more likely low - less likely high - less likely stable – less likely Question 6 Which dividend policy tends to eliminate recurring retained earnings accounts? retained earnings approach residual dividend approach stable dividend policy capital expenditures approach Question 7 If a firm is taxed at 40% and an individual is in the 15% dividend tax bracket what is the total amount per $1 of earnings an investor receives as a result of a double taxation environment? (round to the hundredth) . $0.51 Question 8 In the United States a dividend is most frequently paid . Quarterly Question 1 A policy basis dividends on what remains after funds have been retained to finance the equity portion of a company’s capital budget. residual dividend Question 2 Which dividend policy tends to eliminate recurring retained earnings accounts? fixed dividend yield policy residual dividend approach retained earnings approach stable dividend policy Question 3 Investors who are concerned with how a firm manages retained earnings would encourage which dividend policy? stable dividend policy target payout ratio a policy that aims to achieve the lowest payout possible a policy that aims to achieve the highest payout possible Question 4 In the United States a dividend is most frequently paid . Quarterly Question 5 If a firm is taxed at 40% and an individual is in the 15% dividend tax bracket what is the total amount per $1 of earnings an investor receives as a result of a double taxation environment? (round to the hundredth) . $0.51 Question 1 In the United States a dividend is most frequently paid . Quarterly Question 2 Which dividend policy tends to eliminate recurring retained earnings accounts? fixed dividend yield policy stable dividend policy capital expenditures approach residual dividend approach Question 3 A _____ is intended to be paid periodically in equal amounts recurring over time. special dividend common dividend extra dividend regular dividend Question 4 Which of the following Is not a dividend policy? (choose 2) residual dividend approach variable dividend policy variable payout ratio target payout ratio Question 5 Individuals in _____ tax brackets are _____ to prefer regular dividends. higher – indifferent higher – more likely lower - less likely lower – more likely Solution Question 6 If a firm is taxed at 40% and an individual is in the 15% dividend tax bracket what is the total amount per $1 of earnings an investor receives as a result of a double taxation environment? (round to the hundredth) . $0.51 Question 7 If a firm has _____ flotation costs they will be _____ to issue dividends. low - less likely high - less likely stable – less likely high – more likely Question 8 Investors who are concerned with how a firm manages retained earnings would encourage which dividend policy? target payout ratio stable dividend policy a policy that aims to achieve the highest payout possible a policy that aims to achieve the lowest payout possible Question 1 Which of the following is not a common way for firms to distribute earnings? reinvest the earnings into the business make capital expenditures pay earnings to shareholders in the form of dividends pay earnings to bondholders in the form of special coupons Question 2 Dividends that are reinvested are _____. (choose 2) not beneficial for the issuer trying to retain capital taxed as capital gains often utilized to purchase shares at a discount taxed as income Question 3 Which dividend policy tends to eliminate recurring retained earnings accounts? capital expenditures approach residual dividend approach stable dividend policy retained earnings approach Question 4 If a firm _____ their dividend policy the market will _____. (choose 2) negatively alters – respond positively eliminates – respond positively positively alters – respond positively eliminates – respond negatively Question 5 Which of the following Is not a dividend policy? (choose 2) retained earnings approach residual dividend approach variable dividend policy scenario dividend approach Question 6 Some countries offer a ______ that offers separate tax rates on funds that are distributed and those that are retained. income tax rate dividend deduction split rate tax capital gains tax rate Question 1 A policy basis dividends on what remains after funds have been retained to finance the equity portion of a company’s capital budget. residual dividend Correct View solution Question 2 If a firm has _____ flotation costs they will be _____ to issue dividends. high – more likely low - less likely variable – more likely low – more likely low – more likely Correct View solution Question 3 If a firm _____ their dividend policy the market will _____. (choose 2) eliminates – respond positively negatively alters, respond negatively negatively alters – respond positively positively alters – respond positively negatively alters, respond negatively positively alters – respond positively Correct View solution Question 4 A _____ is intended to be paid periodically in equal amounts recurring over time. liquidating dividend extra dividend regular dividend special dividend regular dividend Correct View solution Question 5 Dividends that are reinvested are _____. (choose 2) not beneficial for the issuer trying to retain capital often utilized to purchase shares at a discount beneficial for the issuer trying to retain capital often utilized to purchase shares at a premium often utilized to purchase shares at a discount beneficial for the issuer trying to retain capital Correct View solution Question 6 Which dividend policy tends to eliminate recurring retained earnings accounts? residual dividend approach capital expenditures approach retained earnings approach fixed dividend yield policy residual dividend approach Correct View solution Question 7 Which of the following is not a common way for firms to distribute earnings? pay earnings to shareholders in the form of dividends repurchase shares from employee plans repurchase shares on the market make capital expenditures repurchase shares from employee plans Correct View solution Question 8 Which of the following Is not a dividend policy? (choose 2) stable dividend policy variable dividend policy residual dividend approach retained earnings approach variable dividend policy retained earnings approach Correct