Homework Answers
| 21. Which of the following is not a true statement regarding stock options? |
| b. The exercise of stock options could result in either gains or losses. |
| 22. The price/earnings ratio: |
| e. Indicates a firm's future growth. |
| 23. Stable dividend policy would most commonly imply: |
| a. Stable dividends per share. |
| 24. A firm has a degree of financial leverage of 1.3. If earnings before interest and tax increase by 10%, then net income: |
| c. Will increase by 13.0% |
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21. Which of the following is not a true statement regarding stock options? a. They may...
Which of the following statement is correct regarding dividends? A) A stock split always increases the...
Which of the following statement is correct regarding dividends? A) A stock split always increases the firm’s number of shares outstanding. B) All else equal, the market value of a stock will tend to decrease by roughly the aftertax value of the dividend on the record date. C) By paying the same dollar amount of dividend per share each quarter, the firm will always have the same dividend yield each quarter. D) For a 3:2 stock split, the stock dividend...
Which of the following statements regarding dividends and dividend policy is LEAST true? A. With ...
Which of the following statements regarding dividends and dividend policy is LEAST true? A. With no taxes, the idea of homemade dividends implies that dividend policy doesn't matter. B. A stock repurchase may be a preferable alternative to dividends, for investors in higher tax brackets. C. The clientele effect suggests that investors prefer higher dividend paying stocks. D. The signalling effects of dividends imply that a firm may be able to increase firm value by increasing dividends
Which of the following statements is FALSE regarding profitable and unprofitable growth?
Which of the following statements is FALSE regarding profitable and unprofitable growth? If the firm retains more earnings, it will bea able to pay out less of those earnings, which means that the firm will have to reduce its dividend. A firm can increase its growth rate by retaining more of its earnings. Cutting the firm's dividend to increase investment will raise the stock price if. and only if, the new investments have a positive net present value (NPV). If...
7. Which of the following statement is correct regarding dividends? A) All else equal, the market...
7. Which of the following statement is correct regarding dividends? A) All else equal, the market value of a stock will tend to decrease by roughly the aftertax value of the dividend on the payment date. B) Any stock dividend is considered to be a one-time event that will not be repeated? C) Dividends tend to fluctuate significantly from quarter to quarter. D) A direct result of a two-for-one stock split is a 50 percent decrease in the value per...
Consider stock-based compensation: stock options, restricted stock and stock appreciation rights. Which of the following statements...
Consider stock-based compensation: stock options, restricted stock and stock appreciation rights. Which of the following statements is FALSE? a. Stock options only impact earnings in the year of issue. b. Stock options and other share-based awards may have a dilutive impact on earnings per share. c. Restricted stock and restricted stock units are now frequently used because compensation expense is typically lower as compared to compensation expense for stock options. d. Stock appreciation rights give the employee compensation (stock or...
1. Which statement is incorrect? a. Dividend yield measures the rate of return on the market price of a share. b. The di...
1. Which statement is incorrect? a. Dividend yield measures the rate of return on the market price of a share. b. The dividend payout ratio measures the percentage of profit paid out in dividends to ordinary shareholders. c. Dividend per share is the ratio to use when comparing income from shares with income from alternative investments. d. Dividend yield is an important ratio for an investor who is acquiring shares mainly for income. 2. A profit ratio for a retailer...
Stock dividend versus stock split Firm The board of Wicker Home Health Care, Inc., is exploring...
Stock dividend versus stock split Firm The board of Wicker Home Health Care, Inc., is exploring ways to expand the number of shares outstanding in an effort to reduce the market price per share to a level that the firm considers more appealing to investors. The options under consideration are a 20% stock dividend and, alternatively, a 5-for-4 stock split. At the present time, the firm's equity account and other per-share information are given as follows: a. Show the effect...
Exercise 19-17 EPS; stock dividend; nonconvertible preferred stock; treasury shares; shares sold; stock options [LO19-5, 19-6,...
Exercise 19-17 EPS; stock dividend; nonconvertible preferred stock; treasury shares; shares sold; stock options [LO19-5, 19-6, 19-7, 19-8] On December 31, 2017, Berclair Inc, had 400 million shares of common stock and 5 million shares of 9%, $100 par value cumulative preferred stock issued and outstanding. On March 1, 2018, Berclair purchased 104 million shares of its common stock as treasury stock. Berclair issued a 5% common stock dividend on July 1, 2018. Four million treasury shares were sold on...
Which of the following statements is true? O Increasing dividends will always decrease the stock price,...
Which of the following statements is true? O Increasing dividends will always decrease the stock price, because the firm is depleting internal funding resources. O Increasing dividends will always increase the stock price. Increasing dividends may not always increase the stock price, because less earnings may be invested back into the firm and that impedes growth Walter Utilities is a dividend paying company and is expected to pay an annual dividend of $2.05 at the end of the year. Its...
Which of the following items is not a characteristic of a common stock? a. It offers...
Which of the following items is not a characteristic of a common stock? a. It offers the chance for the firm to remain in business forever b. It gives the owner priority if the firm files for bankruptcy c. It represents a claim against future common dividends d. Its market value is constantly changing e. It represents ownership in the firm Under which of the following circumstances can you not use the DDM to value a stock? a. When the...
7. Which of the following statement is correct regarding dividends? A) All else equal, the market value of a stock will tend to decrease by roughly the aftertax value of the dividend on the payment date. B) Any stock dividend is considered to be a one-time event that will not be repeated? C) Dividends tend to fluctuate significantly from quarter to quarter. D) A direct result of a two-for-one stock split is a 50 percent decrease in the value per...
Stock dividend versus stock split Firm The board of Wicker Home Health Care, Inc., is exploring ways to expand the number of shares outstanding in an effort to reduce the market price per share to a level that the firm considers more appealing to investors. The options under consideration are a 20% stock dividend and, alternatively, a 5-for-4 stock split. At the present time, the firm's equity account and other per-share information are given as follows: a. Show the effect...
Exercise 19-17 EPS; stock dividend; nonconvertible preferred stock; treasury shares; shares sold; stock options [LO19-5, 19-6, 19-7, 19-8] On December 31, 2017, Berclair Inc, had 400 million shares of common stock and 5 million shares of 9%, $100 par value cumulative preferred stock issued and outstanding. On March 1, 2018, Berclair purchased 104 million shares of its common stock as treasury stock. Berclair issued a 5% common stock dividend on July 1, 2018. Four million treasury shares were sold on...
Which of the following statements is true? O Increasing dividends will always decrease the stock price, because the firm is depleting internal funding resources. O Increasing dividends will always increase the stock price. Increasing dividends may not always increase the stock price, because less earnings may be invested back into the firm and that impedes growth Walter Utilities is a dividend paying company and is expected to pay an annual dividend of $2.05 at the end of the year. Its...
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