ways: (I) Dividends (II) Share repurchases (III) Interest payments A) I only B) II only C) III only D) I and II only Answer: D Type: Easy Page: 415 2. Dividends are decided by: (I) The managers of a firm (II) The government (III) The board of directors A) I only B) II only C) III only D) I and II only Answer: C Type: Easy Page: 416 3. Which of the following dividends is never in the form of cash? (I) Regular dividend (II) Special dividend (III) Stock dividend (IV) Liquidating dividend A) I only
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CHAPTER 14 DIVIDENDS AND DIVIDEND POLICY Solutions to Questions and Problems Basic NOTE: All end-of-chapter problems were solved using a spreadsheet. Many problems require multiple steps. Due to space and readability constraints‚ when these intermediate steps are included in this solutions manual‚ rounding may appear to have occurred. However‚ the final answer for each problem is found without rounding during any step in the problem. 1. With no taxes we would expect the stock price to drop by exactly
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Chapter 11 Owners’ Equity A Overview of Capital Stocks B Sale and Issuance of Common Stock C Treasury Stock D Cash Dividends‚ Stock Dividends‚ and Stock Splits E Preferred Stock 1 McGraw-Hill ACCT2010 A. Authorized‚ Issued‚ and Outstanding Shares Authorized shares are the maximum number of shares of capital stock that can be sold to the public. Issued shares are authorized shares of stock that have been sold. Unissued shares are authorized shares of stock that never have been sold. 2 McGraw-Hill
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different issues about: financing decisions (share or bond issue) – NOT IPO‚ dividend decision (residual‚ stable or smooth policy; updated dividend payment) using real options in corporate finance decision (abandon or expand) working capital management (cash holding; A/R management) and financial planning in practice (Pro-forma Financial Statement) I. Introduction 1. Topic: Dividend decision A dividend is something of value that is distributed to a firm’s stockholders on a pro-rata
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recommendation on the restructuring of the dividend payout policy for Gainesboro Machine Tools Corporation. In the past few years the company has experienced a decrease in sales due to increased competition. With the recent development of the Artificial Workforce‚ the company is looking at making a positive turnaround. With the soon to come global expansion and the forecasted growth in sales brought by new innovations of the Artificial Workforce‚ the direction of the dividend policy needs to be determined. When
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Summary The objective of this paper is to examine the relationship between corporate governance on dividends payout in Canada to better understand "why companies pay dividends". In the light of agency theory‚ Adjaoud and Ben-Amar tested two competing hypothesis‚ which are outcome and substitution hypothesis. They chose Canada to examine the relationship between corporate governance and corporate dividend payments for two reasons; first‚ the comparability between Canada and USA from the perspective
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The corporate valuation model cannot be used unless a company pays dividends. a. True b. False ANSWER: False 14. Projected free cash flows should be discounted at the firm’s weighted average cost of capital to find the firm’s total corporate value. a. True b. False ANSWER: True 15. Preferred stock is a hybrid—a sort of cross between a common stock and a bond—in the sense that it pays dividends that normally increase annually like a stock but its payments are contractually guaranteed
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The essence of the bird-in-the-hand theory of dividend policy (advanced by John Litner in 1962 and Myron Gordon in 1963) is that shareholders are risk-averse and prefer to receive dividend payments rather than future capital gains. Shareholders consider dividend payments to be more certain that future capital gains – thus a “bird in the hand is worth more than two in the bush”. Gorden contended that the payment of current dividends “resolves investor uncertainty”. Investors have
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ACC 112 Solutions to CHAPTER 13 HANDOUT Corporations: Organization‚ Capital Stock Transactions and Dividends Copyright protected: Janice Stoudemire‚ CPA Certain material used with permission of South-Western Publishing HOW DO YOU ACCOUNT FOR ORGANIZATION COSTS? Example: A company incorporates on 9/1/08 and incurs organization expenses of $4‚000 attorney fees‚ $3‚000 accounting fees‚ and $3‚000 stock printing costs. •Journal entry
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Chapter 22: Dividend Policy Multiple Choice Questions 1. When is the ex-dividend date if the holder of record date is April 14‚ 2006? A. April 15 B. April 16 C. April 12 D. April 13 Level of difficulty: Medium Solution: C Ex-dividend date is the second business date before the holder of record date. 2. Which of the following statements about M&M assumptions is false? A. There are no taxes. B. Not all firms maximize value. C. There is no debt. D. Markets are perfect. Level of difficulty:
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