DSM 13

stock split

A _____________ lowers the market price of a firm's stock by increasing the number of shares outstanding.

extra

A company may pay a(n) ______ dividend when earnings are higher than normal in a given period.

keep the share price in an optimal trading range

A company might initiate a stock split to ___________.

low-regular-and-extra

Companies that adopt a _________ dividend policy seek to provide a constant dividend with an additional amount earnings are higher than normal in a given period.

constant-payout-ratio

Consistent Corporation has a policy of paying out 12% of earnings to stockholders in the form of a dividend. It appears that Consistent has a __________.

are more likely to issue stock dividends.

In general, firms with rapid growth:

dividends are irrelevant to investor's valuation of the firm

Modigliani and Miller argue that ____________.

of record on the date or record

Pear Computer Imaging announced that it will pay a $2.00 per share dividend. The firm will pay the dividend to all shareholders __________.

negative signal

The dividend signaling hypothesis would interpret a cut in dividends as a _____________.

board of directors

The payment of cash dividends to corporate stockholders is decided by the ____________.

lower the market price of the stock

The purpose of a stock split is to ___________.

irrelevant

The residual theory of dividends suggests that dividends are __________ to the value of the firm.

legal capital

The term ___________ may refer to the par value of common stock or the sum of the par value and paid-in capital in excess of par for common stock, depending upon the state of incorporation.

225 shares, at $50 per share

Tyler Weinrich, a single investor in the 15% federal tax bracket, owns 150 shares of Newmont Exploration. The stock has risen from its price of $40 a share to $75 a share. Because the board of directors believes that Newmont Exploration will be more actively traded in the $40 to $60 range, it has just announced a 3-for-2 stock split. Assuming no other information came out about Newmont Exploration, how many shares would Tyler have and what would be their price after the split?

distribute excess cash to the owners

When common stock is repurchased and retired, the underlying motive is to ____________.

Constant-payout-ratio

Which of the following is a commonly used dividend policy?

Enhancing shareholder value

Which of the following is a good reason for a firm to repurchase stock?

30%

A firm has after-tax earnings of $2,000,000 and has declared a cash dividend of $600,000. The firm's dividend payout ratio is __________.

Dutch aution repurchase

A stock repurchase method where the firm specifies the number of shares it is willing to buy back at various prices and then allows investors to indicate how many shares they will sell at each price is the process used in a __________.

catering

According to __________ theory investors have a fluctuating demand for dividends over time that often differs based on economic or market conditions.

are less risky than future cash distributions.

According to the bird-in-the-hand argument, investors believe current dividends:

clientele effect

Different payout policies will attract different types of investors due to _____________.

at prices below the current market price.

Dividend reinvestment plans, or DRIPs, often allow stockholders use dividend proceeds to buy additional shares of the firm's stock:

fell less than earnings.

During the 2007-2009 recession dividends:

An open-market repurchase

__________ is the most common way for a firm to repurchase shares.

Regular dividend

__________ policy is when the firm pays out a fixed dollar dividend each period.