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11.Consider the procedure whereby the firm states a series of

Question : 11.Consider the procedure whereby the firm states a series of : 1409497

 

11.Consider the procedure whereby the firm states a series of prices at which it is prepared to repurchase stock. Shareholders then submit offers indicting how many shares they wish to sell and at which price. The firm then calculates the lowest price at which it is able to buy the desired number of shares. This procedure is known as a(n): 
 
 

A. open market repurchase.

B. Dutch auction.

C. green mail.

D. tender offer.

12.What is the likely impact on a typical individual investor if a firm undertakes a stock repurchase in lieu of a cash dividend? 
 
 

A. Lower income taxes, if capital gains tax rates are less than dividend tax rates

B. Higher income taxes, if capital gains tax rates are less than dividend tax rates

C. Lower share price

D. A tax-free transaction

13.Suppose that there are no taxes, transactions costs, or other market imperfections. Which of the following actions is most likely to make shareholders better off? 
 
 

A. Increase dividends.

B. Reduce share repurchases.

C. Announce that dividends will not change for at least three years.

D. Eliminate negative-NPV projects.

14.Which of the following are true?

I) Firms have long-run target dividend payout ratios.
II) Dividend changes follow shifts in long-term, sustainable earnings.
III) Managers are reluctant to make dividend changes that might have to be reversed. 
 
 

A. I only

B. II only

C. III only

D. I, II, and III

15.According to survey data, which is the least-often cited dividend policy consideration? 
 
 

A. Firms want to avoid dividend reductions.

B. Firms desire a smooth dividend policy.

C. Firms avoid dividend policy reversals.

D. Firms would prefer to raise new funds rather than reduce dividends.

16.Generally, firms engage in stock repurchases during:

I) boom times as firms accumulate excess cash;
II) recessions due to low stock prices;
III) times when competitor's stock prices are dropping 
 
 

A. I only

B. II only

C. III only

D. II and III only

17.According to financial executives' views on dividend policy, which of the following statements is most frequently cited? 
 
 

A. We try to avoid reducing the dividend.

B. We try to maintain a smooth dividend stream.

C. We look at the current dividend level.

D. We are reluctant to make a change that may have to be reversed.

18.Generally, investors interpret the announcement of an increase in dividends as: 
 
 

A. bad news and the stock price drops.

B. good news and the stock price increases.

C. a nonevent and does not affect the stock price.

D. very bad news and the stock price plunges.

19.Generally, investors interpret the announcement of a decrease in dividends as: 
 
 

A. bad news and the stock price drops.

B. good news and the stock price increases.

C. a nonevent and does not affect the stock prices.

D. very good news and the stock price jumps up.

20.Generally, investors view the announcement of an open-market repurchase program as: 
 
 

A. bad news and the stock price drops.

B. good news and the stock price increases.

C. a nonevent and does not affect the stock price.

D. very bad news and the stock price plunges.

 

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