Chapter 7

The dividend yield is defined as:

next year's expected dividend divided by the current market price per share.

Jensen Shipping has four open seats on its board of directors. How many shares will a shareholder need to control to ensure that his or her candidate is elected to the board given the fact that the firm uses straight voting? Assume each share receives one vote

50% of the shares plus one share

Which one of the following must equal zero if a firm pays a constant annual dividend?

capital gains yield

Which one of the following types of securities has the lowest priority in a bankruptcy proceeding?

common stock

Mary owns 100 shares of stock. Each share entitles her to one vote per open seat on the board of directors. Assume there are three open seats in the current election and Mary casts all 300 of her votes for a single candidate. What is the term used to describe this type of voting?

cumulative

Which type of stock pays a fixed dividend, receives first priority in dividend payment, and maintains the right to a dividend payment, even if that payment is deferred?

cumulative preferred

The capital gains yield equals which one of the following?

dividend growth rate

The required return on a stock is equal to which one of the following if the dividend on the stock decreases by a constant percent per year?

dividend yield + capital gains yield

If shareholders are granted a preemptive right they will:

have priority in the purchase of any newly issued shares

Which one of the following will increase the current value of a stock?

increase in the capital gains yield

On which one of the following dates do dividends become a liability of the issuer for accounting purposes?

on the date the board declares the dividend

Dividends are:

paid out of Net income

Kate could not attend the last shareholders' meeting and thus she granted the authority to vote on her behalf to the managers of the firm. Which term applies to this granting of authority?

proxy

The dividend yield on a stock will increase if the:

stock price decreases

There are two open seats on the board of directors. If two separate votes occur to elect the new directors, the firm is using a type of voting that is best described as _____ voting.

straight