Ch.17 Flashcards
Generally speaking, which of the following would not affect a firm’s share price?
Multiple Choice
Internal hiring practices.
Stock dividend.
Reverse stock split.
Stock split.
Cash dividend.
Internal hiring practices.
The firm might consider acquiring other companies as an alternative to dividend payouts.
true or false
true
What can a firm do with excess cash after it has invested in all its available positive NPV projects?
Repurchase shares and acquire other companies.
Invest in zero or negative NPV projects.
Acquire other companies.
Repurchase shares.
Repurchase shares, acquire other companies, or invest in zero NPV projects.
Repurchase shares, acquire other companies, or invest in zero NPV projects.
Which of the following is the best definition for the declaration date?
A situation where dividends and capital gains are repackaged and sold separately from common shares.
The date on which holders of record are designated to receive a dividend.
The date two business days before the date of record, establishing those individuals entitled to a dividend.
The date on which the board of directors passes a resolution to pay a dividend.
The idea that individual investors can undo corporate dividend policy by reinvesting dividends or selling shares of stock.
The date on which the board of directors passes a resolution to pay a dividend.
A firm currently has 2,400,000 shares outstanding. After a 5-for-12 reverse stock split, how many shares will be outstanding?
Multiple Choice
1,600,000
1,800,000
1,000,000
800,000
1,000,000
A three-for-two stock split gives existing shareholders the same number of shares as a ________ stock dividend.
Multiple Choice
30%
40%
50%
20%
60%
50%
Arthur’s Pass Inc. has 200,000 common shares outstanding, each selling at a market price of $12. The par (book) value of its common shares is $2 per share. The firm currently has retained earnings of $800,000 on its statement of financial position. If the firm declares a 30% stock dividend, what will be the amount shown for retained earnings on the statement of financial position?
Multiple Choice
$90,000
$100,000
$70,000
$80,000
$60,000
$80,000
You own stock in a Toronto firm that has 1.25 million shares outstanding. The current stock price is $13.50 per share. If the company issues a 10% stock dividend, what would you expect the stock price to be after the dividend is paid?
$12.27
$13.30
$12.82
$13.49
$13.71
$12.27
Suppose a firm wishes to have its stock listed on an exchange but its share price is not high enough to meet the exchange’s specified minimum price level. How might the firm remedy this situation and reduce the number of shares outstanding at the same time?
Multiple Choice
Execute a reverse stock split.
Pay a liquidating dividend.
Pay a regular cash dividend.
Execute a stock split.
Pay a stock dividend.
Execute a reverse stock split.
Timothy owns 540 shares of Countess Corporation, which is priced at $13.53 per share. The company plans a 1-for-4 reverse stock split. How many shares will Timothy own and what will the share price be after the reverse stock split?
Multiple Choice
2,160; $54.12
2,160; $3.38
135; $54.12
135; $3.38
135; $13.53
135; $54.12
Zamfir Corporation has a current price of $75 per share. It has declared a 5 for 3 stock split. Given this information, determine the share price after the split.
Multiple Choice
$125
$15
$100
$45
$25
45
The Cincinnati Chili Kitchen has just announced the repurchase of $125,000 of its stock. The company has 39,000 shares outstanding and earnings per share of $3.29. The company stock is currently selling for $76.09 per share. What is the price-earnings ratio after the repurchase?
Multiple Choice
23.13 times
22.15 times
23.61 times
21.52 times
24.10 times
22.15 times
regular cash dividends
‘non-surprising’ cash payments made directly to stockholders regularly
Extra cash dividend or Bonus dividend
– indication that the “extra” or “bonus” amount may not be repeated in the future
Special cash dividend
like extra dividend, but will not be repeated
