B) False
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B) False
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B) False
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A) 63.57%
B) 60.03%
C) 62.39%
D) 58.86%
E) 59.45%
G) B) and C)
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B) False
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A) One advantage of dividend reinvestment plans is that they enable investors to avoid paying taxes on the dividends they receive.
B) If a company has an established clientele of investors who prefer a high dividend payout,and if management wants to keep stockholders happy,it should not adhere strictly to the residual dividend model.
C) If a firm adheres strictly to the residual dividend model,then,holding all else constant,its dividend payout ratio will tend to rise whenever its investment opportunities improve.
D) If Congress eliminates taxes on capital gains but leaves the personal tax rate on dividends unchanged,this would motivate companies to increase their dividend payout ratios.
E) Despite its drawbacks,following the residual dividend model will tend to stabilize actual cash dividends,and this will make it easier for firms to attract a clientele that prefers high dividends,such as retirees.
G) C) and D)
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A) The firm's net income increases.
B) The company increases the percentage of equity in its target capital structure.
C) The number of profitable potential projects increases.
D) Congress lowers the tax rate on capital gains,leaving the rest of the tax code unchanged.
E) Earnings are unchanged,but the firm issues new shares of common stock.
G) A) and C)
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A) Under the tax laws as they existed in 2017,a dollar received by an individual taxpayer as interest income is taxed at the same rate as a dollar received as dividends.
B) One nice feature of dividend reinvestment plans (DRIPs) is that they reduce the taxes investors would have to pay if they received cash dividends.
C) Empirical research indicates that,in general,companies send a negative signal to the marketplace when they announce an increase in the dividend.As a result,share prices fall when dividend increases are announced because investors interpret the increase as a signal that the firm expects fewer good investment opportunities in the future.
D) If a company needs to raise new equity capital,a new-stock dividend reinvestment plan would make sense.However,if the firm does not need new equity,then an open market purchase dividend reinvestment plan would probably make more sense.
E) Dividend reinvestment plans have not caught on in most industries,and today over 99% of all DRIPs are offered by utilities.
G) B) and C)
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A) Stock repurchases can be used by a firm as part of a plan to change its capital structure.
B) After a 3-for-1 stock split,a company's price per share should fall,but the number of shares outstanding will rise.
C) Investors may interpret a stock repurchase program as a signal that the firm's managers believe the stock is undervalued,or,alternatively,as a signal that the firm does not have many good investment opportunities.
D) A company can repurchase stock to distribute a large one-time cash inflow,say from the sale of a division,to stockholders without having to increase its regular dividend.
E) Stockholders pay no income tax on dividends if the dividends are used to purchase stock through a dividend reinvestment plan.
G) A) and C)
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A) Firms with a lot of good investment opportunities and a relatively small amount of cash tend to have above-average dividend payout ratios.
B) One advantage of the residual dividend model is that it leads to a stable dividend payout,which investors like.
C) An increase in the stock price when a company cuts its dividend is consistent with signaling theory as postulated by MM.
D) If the "clientele effect" is correct,then for a company whose earnings fluctuate,a policy of paying a constant percentage of net income will probably maximize its stock price.
E) Stock repurchases make the most sense at times when a company believes its stock is undervalued.
G) None of the above
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A) $51.50
B) $45.50
C) $50.00
D) $38.50
E) $49.00
G) All of the above
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B) False
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B) False
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A) One disadvantage of dividend reinvestment plans is that they increase transactions costs for investors who want to increase their investment in the company.
B) One advantage of dividend reinvestment plans is that they enable investors to postpone paying taxes on the dividends credited to their account.
C) Stock repurchases can be used by a firm that wants to increase its debt ratio.
D) Stock repurchases make sense if a company expects to have a lot of profitable new projects to fund over the next few years,provided investors are aware of these investment opportunities.
E) One advantage of an open market dividend reinvestment plan is that it provides new equity capital and increases the shares outstanding.
G) A) and B)
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A) $247,450
B) $186,200
C) $225,400
D) $301,350
E) $245,000
G) C) and D)
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