Question 1\t\u00a0\t \ufffd \ufffd\u00a0\t \ufffd \ufffd\u00a0 Which of the following statements about dividend policies is correct?\t\u00a0\t \ufffd \ufffd \ufffd \ufffd \ufffd \ufffd \ufffd\t\u00a0Question 2\t\u00a0\t \ufffd \ufffd\u00a0\t \ufffd \ufffd\u00a0 If a firm adheres strictly to the residual dividend policy, the issuance of new common stock would suggest that\t \ufffd \ufffd \ufffd \ufffd \ufffd \ufffd \ufffd\t \ufffd \ufffd \ufffd \ufffd \ufffd \ufffd \ufffd\t\u00a0Question 3\t\u00a0\t \ufffd \ufffd\u00a0\t \ufffd \ufffd\u00a0 Which of the following statements is correct?\tAnswer \ufffd \ufffd \ufffd \ufffd \ufffd \ufffd\u00a0\u00a0\u00a0\u00a0\t \ufffd \ufffd \ufffd \ufffd\u00a0\u00a0\u00a0\t\u00a0\tCorrect Answer: \ufffd\u00a0\u00a0\u00a0\u00a0\tIf a firm repurchases some of its stock in the open market, then shareholders who sell their stock for more than they paid for it will be subject to capital gains taxes.\t \ufffd \ufffd \ufffd \ufffd \ufffd \ufffd \ufffd\t\u00a0Question 4\t\u00a0\t \ufffd \ufffd\u00a0\t \ufffd \ufffd\u00a0 Which of the following statements is CORRECT?\t\u00a0\t \ufffd \ufffd \ufffd \ufffd \ufffd \ufffd \ufffd\t\u00a0Question 5\t\u00a0\t \ufffd \ufffd\u00a0\t \ufffd \ufffd\u00a0 Which of the following statements is correct?\t \ufffd \ufffd \ufffd \ufffd \ufffd \ufffd \ufffd\t\u00a0\t \ufffd \ufffd \ufffd \ufffd \ufffd \ufffd \ufffd\t\u00a0Question 6\t\u00a0\t \ufffd \ufffd\u00a0\t \ufffd \ufffd\u00a0 Which of the following should not\tinfluence a firm’s dividend policy decision?\t \ufffd \ufffd \ufffd \ufffd \ufffd \ufffd \ufffd\t \ufffd \ufffd \ufffd \ufffd \ufffd \ufffd \ufffd\t\u00a0Question 7\t\u00a0\t \ufffd \ufffd\u00a0\t \ufffd \ufffd\u00a0 If a firm adheres strictly to the residual dividend policy, then if its optimal capital budget requires the use of all earnings for a given year (along with new debt according to the optimal debt\/total assets ratio), then the firm should pay\t \ufffd \ufffd \ufffd \ufffd \ufffd \ufffd \ufffd\t \ufffd \ufffd \ufffd \ufffd \ufffd \ufffd \ufffd\t\u00a0Question 8\t\u00a0\t \ufffd \ufffd\u00a0\t \ufffd \ufffd\u00a0 You own 100 shares of Troll Brothers’ stock, which currently sells for $120 a share.\u00a0 The company is contemplating a 2-for-1 stock split.\u00a0 Which of the following best describes what your position will be after such a split takes place?\tAnswer \ufffd \ufffd \ufffd \ufffd \ufffd \ufffd\u00a0\u00a0\u00a0\u00a0\t \ufffd \ufffd \ufffd \ufffd\u00a0\u00a0\u00a0\tQuestion 9\t\u00a0\t \ufffd \ufffd\u00a0\t \ufffd \ufffd\u00a0 Myron Gordon and John Lintner believe that the required return on equity increases as the dividend payout ratio is decreased.\u00a0 Their argument is based on the assumption that\t \ufffd \ufffd \ufffd \ufffd \ufffd \ufffd \ufffd\t\u00a0Question 10\t\u00a0\t \ufffd \ufffd\u00a0\t \ufffd \ufffd\u00a0 Which of the following statements is correct?\t \ufffd \ufffd \ufffd \ufffd \ufffd \ufffd \ufffd\t \ufffd \ufffd \ufffd \ufffd\u00a0\u00a0\u00a0\t\u00a0Question 11\t\u00a0\t \ufffd \ufffd\u00a0\t \ufffd \ufffd\u00a0 Which of the following would be most likely to lead to a decrease in a firm’s dividend payout ratio?\t \ufffd \ufffd \ufffd \ufffd \ufffd \ufffd \ufffd\t \ufffd \ufffd \ufffd \ufffd \ufffd \ufffd \ufffd\t\u00a0Question 12\t\u00a0\t \ufffd \ufffd\u00a0\t \ufffd \ufffd\u00a0 Which of the following statements is correct?\t \ufffd \ufffd \ufffd \ufffd \ufffd \ufffd \ufffd\t \ufffd \ufffd \ufffd \ufffd \ufffd \ufffd \ufffd\t\u00a0Question 13\t\u00a0\t \ufffd \ufffd\u00a0\t \ufffd \ufffd\u00a0 Firm M is a mature firm in a mature industry.\u00a0 Its annual net income and net cash flows are both consistently high and stable.\u00a0 However, M’s growth prospects are quite limited, so its capital budget is small relative to its net income.\u00a0 Firm N is a relatively new firm in a new and growing industry. Its markets and products have not stabilized, so its annual operating income fluctuates considerably.\u00a0 However, N has substantial growth opportunities, and its capital budget is expected to be large relative to its net income for the foreseeable future. Which of the following statements is correct?\tAnswer \ufffd \ufffd \ufffd \ufffd \ufffd \ufffd\u00a0\u00a0\u00a0\u00a0\t \ufffd \ufffd \ufffd \ufffd \ufffd \ufffd \ufffd\t\u00a0Question 14\t\u00a0\t \ufffd \ufffd\u00a0\t \ufffd \ufffd\u00a0 Which of the following statements is correct?\t \ufffd \ufffd \ufffd \ufffd \ufffd \ufffd \ufffd\t \ufffd \ufffd \ufffd \ufffd \ufffd \ufffd \ufffd \ufffd \ufffd \ufffd \ufffd\u00a0\u00a0\u00a0\u00a0\t\u00a0Question 15\t\u00a0\t \ufffd \ufffd\u00a0\t \ufffd \ufffd\u00a0 Which of the following statements is correct?\t \ufffd \ufffd \ufffd \ufffd \ufffd \ufffd \ufffd\t \ufffd \ufffd \ufffd \ufffd\u00a0\u00a0\u00a0\t \ufffd \ufffd \ufffd \ufffd \ufffd \ufffd \ufffd\t\u00a0Question 16\t\u00a0\t \ufffd \ufffd\u00a0\t \ufffd \ufffd\u00a0 Which of the following would increase the likelihood that a company would increase its debt ratio, other things held constant?\t \ufffd \ufffd \ufffd \ufffd \ufffd \ufffd \ufffd\t\u00a0Question 17\t\u00a0\t \ufffd \ufffd\u00a0\t \ufffd \ufffd\u00a0 Which of the following statements is CORRECT?\t \ufffd \ufffd \ufffd \ufffd \ufffd \ufffd \ufffd\t\u00a0Question 18\t\u00a0\t \ufffd \ufffd\u00a0\t \ufffd \ufffd\u00a0 Companies HD and LD have the same total assets, operating income (EBIT), tax rate, and business risk.\u00a0 Company HD, however, has a much higher debt ratio than LD.\u00a0 Also HD’s basic earning power (BEP) exceeds its cost of debt (rd).\u00a0 Which of the following statements is CORRECT?\t \ufffd \ufffd \ufffd \ufffd \ufffd \ufffd \ufffd\t \ufffd \ufffd \ufffd \ufffd \ufffd \ufffd \ufffd\t\u00a0Question 19\t\u00a0\t \ufffd \ufffd\u00a0\t \ufffd \ufffd\u00a0 Other things held constant, which of the following events is most likely to encourage a firm to increase the amount of debt in its capital structure?\t \ufffd \ufffd \ufffd \ufffd \ufffd \ufffd \ufffd\t \ufffd \ufffd \ufffd \ufffd \ufffd \ufffd \ufffd\t\u00a0Question 20\t\u00a0\t \ufffd \ufffd\u00a0\t \ufffd \ufffd\u00a0 Which of the following statements is CORRECT?\t \ufffd \ufffd \ufffd \ufffd \ufffd \ufffd \ufffd\t \ufffd \ufffd \ufffd \ufffd \ufffd \ufffd \ufffd\t\u00a0Question 21\t\u00a0\t \ufffd \ufffd\u00a0\t \ufffd \ufffd\u00a0 Which of the following statements is CORRECT?\t \ufffd \ufffd \ufffd \ufffd \ufffd \ufffd \ufffd\t \ufffd \ufffd \ufffd \ufffd\u00a0\u00a0\u00a0\t \ufffd \ufffd \ufffd \ufffd \ufffd \ufffd \ufffd\t\u00a0Question 22\t\u00a0\t \ufffd \ufffd\u00a0\t \ufffd \ufffd\u00a0 The firm’s target capital structure should be consistent with which of the following statements?\t \ufffd \ufffd \ufffd \ufffd \ufffd \ufffd \ufffd\t\u00a0\t \ufffd \ufffd \ufffd \ufffd \ufffd \ufffd \ufffd\t\u00a0Question 23\t\u00a0\t \ufffd \ufffd\u00a0\t \ufffd \ufffd\u00a0 Business risk is affected by a firm’s operations.\u00a0 Which of the following is NOT associated with (or does not contribute to) business risk?\t \ufffd \ufffd \ufffd \ufffd \ufffd \ufffd \ufffd\t \ufffd \ufffd \ufffd \ufffd \ufffd \ufffd \ufffd\t\u00a0Question 24\t\u00a0\t \ufffd \ufffd\u00a0\t \ufffd \ufffd\u00a0 If debt financing is used, which of the following is CORRECT?\t \ufffd \ufffd\u00a0 \ufffd \ufffd \ufffd \ufffd\u00a0\u00a0\u00a0\t \ufffd \ufffd \ufffd \ufffd \ufffd \ufffd \ufffd\t\u00a0Question 25\t\u00a0\t \ufffd \ufffd\u00a0\t \ufffd \ufffd\u00a0 Which of the following events is likely to encourage a company to raise its target debt ratio, other things held constant?\t \ufffd \ufffd \ufffd \ufffd \ufffd \ufffd \ufffd\t \ufffd \ufffd \ufffd \ufffd \ufffd \ufffd \ufffd\t\u00a0Question 26\t\u00a0\t \ufffd \ufffd\u00a0\t \ufffd \ufffd\u00a0 Companies HD and LD have identical tax rates, total assets, and basic earning power ratios, and their basic earning power exceeds their before-tax cost of debt, rd.\u00a0 However, Company HD has a higher debt ratio and thus more interest expense than Company LD.\u00a0 Which of the following statements is CORRECT?\t \ufffd \ufffd \ufffd \ufffd \ufffd \ufffd \ufffd\t \ufffd \ufffd \ufffd \ufffd \ufffd \ufffd \ufffd\t\u00a0Question 27\t\u00a0\t \ufffd \ufffd\u00a0\t \ufffd \ufffd\u00a0 Which of the following statements is CORRECT?\u00a0 As a firm increases the operating leverage used to produce a given quantity of output, this will\t \ufffd \ufffd \ufffd \ufffd \ufffd \ufffd \ufffd\t \ufffd \ufffd \ufffd \ufffd \ufffd \ufffd \ufffd\t\u00a0Question 28\t\u00a0\t \ufffd \ufffd\u00a0\t \ufffd \ufffd\u00a0 Which of the following statements is CORRECT?\t \ufffd \ufffd \ufffd \ufffd \ufffd \ufffd \ufffd\t\u00a0Question 29\t\u00a0\t \ufffd \ufffd\u00a0\t \ufffd \ufffd\u00a0 Which of the following statements is CORRECT?\t \ufffd \ufffd \ufffd \ufffd\u00a0\u00a0\u00a0\t\u00a0Question 30\t\u00a0\t \ufffd \ufffd\u00a0\t \ufffd \ufffd\u00a0 Which of the following statements is CORRECT?<\/p>\n","protected":false},"excerpt":{"rendered":"
Question 1 \u00a0 \ufffd \ufffd\u00a0 \ufffd \ufffd\u00a0 Which of the following statements about dividend policies is correct? \u00a0 \ufffd \ufffd \ufffd \ufffd \ufffd \ufffd \ufffd \u00a0Question 2 \u00a0 \ufffd \ufffd\u00a0 \ufffd \ufffd\u00a0 If a firm adheres strictly to the residual Read More …<\/a><\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[],"tags":[],"class_list":["post-216884","post","type-post","status-publish","format-standard","hentry"],"_links":{"self":[{"href":"https:\/\/www.benedictsol.com\/blogs\/wp-json\/wp\/v2\/posts\/216884","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.benedictsol.com\/blogs\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.benedictsol.com\/blogs\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.benedictsol.com\/blogs\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/www.benedictsol.com\/blogs\/wp-json\/wp\/v2\/comments?post=216884"}],"version-history":[{"count":0,"href":"https:\/\/www.benedictsol.com\/blogs\/wp-json\/wp\/v2\/posts\/216884\/revisions"}],"wp:attachment":[{"href":"https:\/\/www.benedictsol.com\/blogs\/wp-json\/wp\/v2\/media?parent=216884"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.benedictsol.com\/blogs\/wp-json\/wp\/v2\/categories?post=216884"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.benedictsol.com\/blogs\/wp-json\/wp\/v2\/tags?post=216884"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}