FIN-405 (Quiz 5)

Stock splits are often used to:

Adjust the market price of a stock such that it falls within a preferred trading range.

Which of the following lists dividend events in the correct chronological order from earliest to latest?

Declaration date, ex-dividend date, date of record

Based on the concept of the clientele effect, which one of these combinations correctly aligns an investor group with its preferred type of stocks?

High-tax bracket individuals; low-payout stocks

A cash payment made by a firm to its owners in the normal course of business is called at:

Regular cash dividend

Assume personal tax rates are lower than corporate tax rates. From a tax-paying shareholder point of view, how should a firm distribute its excess cash assuming it has funded all positive net present value projects?

Repurchase shares

The information content effect implies that stock prices will rise when dividends are increased provided that the dividend increase:

causes stockholders to increase their expectations of future cash flows.

The date before which a new purchaser of stock is entitled to receive a declared dividend, but on or after which she does not receive the dividend, is called the _____ date.

ex-dividend

Ignoring taxes, and all else equal, the market value of a stock will tend to decrease by the value of the dividend on the:

ex-dividend date.

The principal reason that firms implement a reverse stock split is to:

maintain a minimum share price as set by a stock exchange.

A payment made by a firm to its owners in the form of new shares of stock is called a ________ dividend.

Stock