Payout Policy Quizz Flashcards
Regular dividends are recurring cash payments to the shareholders of a company, whereas special dividends are cash payments to the shareholders with preferred shares
False
Stock dividends are non-cash dividends and are similar to stock splits
True
Corporations who wish to buy shares of a blockholder need to offer a premium over the share price in the market (greenmail). This transaction entails transfer of wealth between the management and the blockholder
False
Dividends are usually taxed higher than capital gains. Thus on the record date, we expect to see a smaller drop than the dividend amount in the share price of a dividend paying company
True
Firms prefer to pay cash to their investors in form of stock repurchases than dividends if they have non-recurring, unsustainable source of cash
True
Consider a firm who wants to do a stock repurchase and MM assumptions hold. Imagine a representative investor who is not sure whether she should fully or partly or not at all tender her shares to the firm. If W_f, W_p, W_n respectively present her wealth in case she fully, partly, or does not sell her holdings to the firm, which of the following is true?
W_f = W_p = W_n
Alex owns 5K shares in Apex Corporation. The ruling tax system has a bigger capital gain tax than the dividend tax. If Apex wants to payout €100mn to its shareholders, Alex would prefer a stock repurchase
False
Mature firms are more likely to pay out dividends or do stock repurchases, because, compared to a start up with many growth opportunities, they generate more cash than they need to invest in new projects
True
The fact that some financial institutions, like trusts and endowment funds, prefer dividends than stock repurchase shows that MM does not apply
True
Assume a mature firm with no positive NPV project whose management has incentives for “empire building”. Shareholders of this firm prefer dividends over stock repurchase to prevent wasting money by the management
False
