BUSI 320 Read & Interact Chapter 18 Assignment solutions complete answers

BUSI 320 Read & Interact Chapter 18 Assignment solutions complete answers 

 

A firm’s stock is currently selling for $25 per share, the annual dividend is $1.00, and expected earnings are $5.00 per share. What is the firm’s dividend yield?

 

A corporation has revenue of $20,000,000, common stock of $1,000,000, retained earnings of $3,000,000, and a net worth of $4,000,000, the maximum dividend payment the corporation could make is

 

A company has 50,000 shares of $8 par stock outstanding and declares a stock dividend of 10%. The current market value of the stock is $10. What dollar amount will redistributed from retained earnings to the common stock account and the capital in excess of par account, respectively?

 

The typical size of a stock dividend is in the range of      .

 

Corporate management must not only ask, “How many profitable investments do we have this year?” They must also ask, “What has been the pattern of dividend payments in the last few years?” These questions relate to the

 

Assume a firm is considering a repurchase of its shares in the market. The firm has $1,000,000 in excess cash, $5,000,000 in earnings after taxes, and 500,000 shares outstanding. The stock trades at a P/E ratio of 20. The current price of the stock is $200 (P/E x EPS) and the dividends per share are $2 (excess cash/shares outstanding). What is the price of the stock after the shares have been reacquired?

 

Under the life cycle growth analysis,       decides how much retained earnings will be spent for internal corporate needs.

 

Assume a company pays out an annual cash dividend of $1.00 per share. The dividend rate per quarter is

 

Current earnings, as an indicator of liquidity, has limitations. For example, a growth firm producing the greatest gains in earnings may be in the      cash position.

 

A firm has cash of $100,000, accounts receivable of $1,200,000, inventory of $4,000,000, retained earnings of $6,000,000, and current earnings or $1,000,000. If the firm paid out $1,000,000 in dividends they would need to sell what dollar amount in assets in order to make the payment.

 

The primary purpose of a stock split is to

 

The dividend that is associated with stocks that are owned for at least 60 days within the 121-day time frame around the ex-dividend date and must be paid by a U.S. corporation or qualified foreign corporation is called a       dividend.

 

A company has 20,000 shares of $10 par stock outstanding and declares a stock dividend of 8%. The number of shares will increase by

 

If an investor purchases stock on or after the ex-dividend date, the investor purchased the stock

 

Long-term capital gains apply to assets held for ____, whereas short-term capital gains apply to assets held for ____.

 

Dividend reinvestment plans enable a firm's stockholders to use cash dividends to

 

If investors have some preference between dividends and retained earnings, there is a problem with which theory?

 

A reverse stock split has the opposite effect of a

 

The percentage return provided by the cash dividend based on the current market price of the stock is called the

 

A firm operating in stage II of the life cycle will have a dividend policy of

 

Stock dividends are used by

 

A firm operating in stage III of the life cycle will have a dividend policy of

 

Which of the following would be negatively impacted by dividend payments in excess of retained earnings?

 

The percentage of a company's earnings paid out to shareholders in the form of a dividend is called the

 

What reason(s) would management have for repurchasing its own stock.

 

After a stock dividend has been transferred from retained earnings to the common stock account and the capital in excess of par account, the net worth of the company will

 

A stock repurchase theoretically (increases or decreases) _____ the price of the stock.

 

According to legal rules, dividends may be distributed from

 

A firm operating in state I of the life cycle will have a dividend policy of

 

A firm that maintains a relatively stable dividend payout hopes to

 

The key dates associated with the declaration of a quarterly dividend are

 

The American Taxpayer At of 2013, left most of the Bush era tax cuts in place but (raised or lowered) ______ the rates on very high-income tax payers.

 

The primary purpose of a split stock is to

 

A primary factor in considering stockholder preferences with respect to dividend policy is the maintenance of

 

If the dividend per share decreases, the information content of the dividend is    .

 

Which factor(s) influence dividend policy?

 

A company that pays out dividends in excess of retained earnings is said to be

 

Dividend policy of larger firms, with a broad base of stockholders, could be _____ by stockholders who are spoiled by past dividend payments.

 

The issue of the relevance of dividend policy relates to

 

A distribution of additional shares to common stockholders is called a

 

Match the word on the left with its appropriate definition.

 

How does the use of a transfer agent for a dividend reinvestment plan benefit the stockholder?

 

The purpose of reverse stock split is to _______ the market value of the stock.

 

The reduction in the par value of a stock along with a proportionate increase in the number of shares outstanding is caused by a

 

Some firms who have easy access to capital markets may issue _____ now or in the future in order to pay dividends now.

 

Retained earnings fails to portray the ________ position of the firm.

 

Match the dividend with its level of taxation.

 

It can be hypothesized that stockholders’ might apply a     discount rate and assign a     valuation to retained earnings as opposed to dividends.

 

1.
all income remaining after paying the creditors and preferred stockholders is referred to as the common stockholders'
 
 
3.
as owners of the firm, common stockholders have the right to vote for the...
 
 
4.
as the price of common stock falls below the conversion value______
 
 
5.
basic earnings per share ________ the effect of convertible securities and warrants. Diluted earnings per share ________ basic earnings per share for the effect of convertible securities and warrants
 
 
6.
Common stock can be classified as a derivative security T/F
 
 
8.
the common stockholders' residual claim to the income can take the form of
 
 
9.
a company can force the conversion of a convertible debt issue by including a ________ provision that allows the company to buy back the issue at _______ value
 
 
11.
a company that issues a convertible debenture will be able to ______ capital at a lower cost if the company believe its stock is ________ valued
 
 
13.
a company would use a futures contract to hedge against the prices of key inputs_____ and the prices of outputs_____
 
 
14.
compared to a traditional equity sale, rights offerings tend to have investment banking fees that are
 
 
15.
the conversion value of a convertible bond is _______
 
 
16.
the conversion value of a convertible bond is the value of the ________ if the bond were to be converted _______
 
 
17.
a convertible bond has a ________ value but no upside limitation
 
 
18.
a convertible securest is most often a _______ that is convertible into _______
 
 
19.
convertible securities are desirable as financing vehicle because they can be ______ whereas the only way to induce the exercise of warrants is to have a ________ provision
 
 
20.
a convertible security is most often
 
 
21.
a derivative is a security whose price is ________ from an _________ security
 
 
23.
dividends are relevant to investors because they resolve ______ in the minds of the investors
 
 
24.
employee stock options allow employees to _____ shares at a price that is _________ the market price if the options are in the money. As shareholder value is created, the options become ________ valuable
 
 
25.
employee stock options are used to
 
 
29.
how are preferred stock dividends and interest treated for taxation purposes
 
 
31.
if a company has a cumulative preferred stocking its capital structure and it has not paid preferred and command dividends in 3 years, it must
 
 
32.
in a futures contract both the buyer and seller have the _______ to complete a transaction at a ________ date for a fixed price
 
 
34.
it can be hypothesized that stockholders' might apply a _______ discount rate and assign a ________ valuation to retained earning as opposed to dividends
 
 
36.
management may desire to maintain control by not paying dividends for fear of _______ the cash position of the firm
 
 
 
 
 
 
 
 
 
 
 

37.
most rights offerings are successful because if the shareholders do not participate in the offering, the investment banker _______ the remaining rights and _______ the shares in the open market
 
 
38.
the opportunity costs of using stockholder funds is known as
 
 
39.
an option provides the holder the _____ but not the ______ to buy or sell a security at a ______ price over a period of time
 
 
40.
ordinary dividends
 
 
41.
a participation provision allows preferred stock holders to
 
 
44.
the primary argument for the relevance of the dividend policy is that stockholders' needs and preferences go beyond the ________ principle of retained earnings
 
 
46.
a proxy provides management or some outside contesting group with the power to
 
 
47.
the purchaser of a call option has the right but not to obligation to _______ and the purchases of a put option has the right, but not the obligation to ________
 
 
48.
the purchaser of a convertible bond often receives an interest rate that is ________ market and must also pay a _______ above the conversion value meaning the investor would receive _______ shares in conversion than could be currently purchases in the open market
 
 
49.
a qualified dividend is a subset of an ________ dividend
 
 
50.
qualified dividends
 
 
53.
the rights offering is priced at a ____________ meaning the new shares are priced ___________ the market price
 
 
54.
short term capital gains are taxed at
 
 
55.
a stockholder who owned 100 shares of a stock when a one for two reverse stock split took place would now own how many shares
 
 
56.
a stockholder wo owned 100 shares of stock when a one for two reverse stock split took place would see their earnings per share
 
 
58.
a warrant is the option to
 
 
59.
a warrant is the ________ to ________ shares from a corporation at an ________ price over a specified period of time
 
 
60.
warrants are sometimes issued with _______ with the intentions of providing access to _______ markets that would otherwise be unavailable
 
 
61.
warrants that are in the money have an exercise price that is ______ the stock price and warrants that are out of the money have an exercise price that is _______ the stock price
 
 
 
 
 
 
 
 
 

62.
what are reasons for a company to issue a warrant?
 
 
63.
what committees can members of the board serve on?
 
 
64.
what type of dividend reinvestment plan benefits the company with increased cash flow because dividends paid are returned to the company
 
 
65.
what type of dividend reinvestment plan benefits the stockholder, but does not increase the cash flow of the company
 
 
67.
when calculating diluted earnings per share for a company with warrants outstanding, adjustments are made to the ________ of the earnings per share ratio but not the ________
 
 
69.
Who has voting rights on a consistent basis?
 
 
 

 

2.
The accounting treatment of a stock split is an adjustment in the _____ account
 
 
5.
Assume a firm is considering a repurchase of its shares in the market. The firm has $1,000,000 in excess cash, $5,000,000 in earnings after taxes and 500,000 shares outstanding. The stock trades at a P/E ratio of 20. The current price of the stock is $200 (P/E x EPS) and the dividends per share are $2 (excess cash/shares outstanding). What is the number of shares that have been reacquired (round to the nearest whole number)
 
 
6.
A company can maintain a constant demand for stock by
 
 
8.
A company that pays out dividends in excess of retained earning is said to be
 
 
9.
The corporation must be able to earn a higher return on its retained earnings than a stockholder would receive after paying taxes on the distributed dividends is known as the
 
 
10.
The date on which the firm examines its books to determine who is entitled to cash dicidend
 
 
11.
A distribution of earnings to stockholders is called
 
 
14.
Dividends are relevant to investors because they resolve ____ in the minds of the investors
 
 
15.
Dividends may be viewed more favorably than retained earnings because
 
 
16.
Earnings per share will be affected by a stock dividend because _____; however, the value of the investor will remain the same
 
 
17.
A firm has cash of $100,000, accounts receivable of $1,200,000, inventory of $4,000,000, retained earnings of $6,000,000, and current earnings or $1,000,000. Legally, the firm could payout dividends in the amount of ____, but may jeopardize the operation the firm.
 
 
20.
A firm operating in the stage IV of the life cycle will have a dividend policy of
 
 
21.
Firms with relatively easy access to financial markets with a record of good performance may sell new common stock to pay dividends now. Management may justify this action in order to maintain _____.
 
 
23.
A firm that provides no cash dividends because it needs all the profits for reinvestment in new assets is in which stage of the life cycle?
 
 
24.
A firm that uses excess cash to buy its own shares in the market has made a
 
 
25.
A firm who maintains a stable growth rate in sales falls into which stage of the life cycle?
 
 
26.
A firm whose sales and ROA are growing at an increasing rate fall into which stage of the life cycle?
 
 
28.
If an investor owns 100 shares of company's stock and a 10% stock dividend is declared, how many new shares of stock will the investor receive?
 
 
34.
Long-term capital gains are taxed at
 
 
35.
Management may desire to maintain control by not paying dividends for fear of _____ the cash position of the firm
 
 
36.
Management may desire to maintain control by not paying dividends for fear of ______ the cash position of the firm
 
 
39.
Most states prohibit the payment of dividend that would impair the
 
 
 
 
 
 
 
 
 
 
 

40.
One purpose of reverse stock split is to attempt to place a stock's value at a level that is acceptable to the
 
 
41.
The opportunity cost of using stockholder fund is known as
 
 
42.
The payment of dividends take place on a(n)
 
 
45.
A plan that provides the investors of the company the opportunity to buy additional shares of stock with cash dividends paid by the company is a
 
 
46.
The primary argument for the relevance of dividend policy is that stockholders' needs and preferences go beyond the ____ principle of retained earnings.
 
 
51.
Retained earnings falls to portray the _____ position of the firm
 
 
55.
Stock dividends are used by growth companies as a form of "informational content" in explaining the
 
 
57.
A stock whose par value is $8 with 200 shares outstanding is split four-for-one. What is/are the effect(s) of this split?
 
 
58.
to be the recipient of a dividend, the investor must have purchased the stock
 
 
61.
Which group must have the protection of keeping contributed capital in place?
 
 
62.
Which of the following three year dividend policy would be preferred, on average, by stockholders.
 
 
64.
Which type of dividend reinvestment plan benefits the stockholder, but does not increase the cash flow of the company.
 
 
 
 
 
 
 
 
 

A stock whose par value is $8 with 200 shares outstanding is split four for one. What is the effects of this split

 

Which type of dividend reinvestment plan benefits the company with increased cash flow because dividends pay are returned to the company