11 May THE “BIRD-IN-THE-HAND DIVIDEND THEORY” SUPPORTS WHICH VIEW OF THE EFFECT OF DIVIDEND POLICY ON COMPANY VALUE?
Which of the following statements would be consistent
with the bird-in-the-hand dividend theory?
A) Investors are indifferent whether stock returns come
from dividend income or capital gains income.
B) Dividends are more certain than capital gains income.
C) Wealthy investors prefer corporations to defer dividend
payments because capital gains produce greater after-tax income.
D) Dividends are less certain than capital gains.
65) Which of the following statements would be consistent
with the residual dividend theory?
A) Wealthy investors prefer corporations to defer dividend
payments because capital gains produce greater after-tax income.
B) Dividends are more certain than capital gains.
C) Dividends should only be paid if a firm has profits in
excess of the amount needed to finance the current year’s capital investments.
D) Investors are indifferent whether stock returns come
from dividend income or capital gains income.
66) Assume that a firm has a steady record of paying high
dividends for years. A new management team decided to cut the current year’s
dividend in half without disclosing why. The market value of the stock fell 35%
on the day the dividend cut was announced. Which of the following would best
explain the stock market’s reaction to the announcement?
A) empirical theory
B) dividend irrelevance theory
C) residual dividend theory
D) information effect
67) Assume that a firm has a steady record of paying stable
dividends for years. Market analysts had expected management to increase the
dividend by 7.5% in the latest quarter. However, management announced a 15%
increase in the current year’s dividend. The market value of the stock rose 20%
on the day of the announcement. Which of the following would best explain the
stock market’s reaction to the announcement?
A) expectations theory
B) dividend irrelevance theory
C) residual dividend theory
D) agency theory
68) Assume that the tax on dividends and the tax on capital
gains is the same. All else equal, what would a prudent investor prefer?
A) The prudent investor would be indifferent between
receiving dividends or capital gains.
B) The prudent investor would prefer dividendsa dollar
today is always worth more than a dollar to be received in the future.
C) The prudent investor would prefer capital gainsthe
capital gain tax liability can be deferred until gains are realized.
D) More information is needed.
69) Which of the following is (are) true?
A) In general, the higher the number of positive NPV
investment opportunities for a firm, the lower the dividend payout ratio.
B) If the clientele effect is correct, firms should follow
a constant dividend payout ratio policy.
C) According to the informational content of dividends, an
increase in dividends is always a positive signal.
D) In industries with volatile earnings, the residual
dividend policy results in the most consistent dividend stream.
70) Which of the following is true if dividend policy is
irrelevant?
A) Perfect capital markets exist.
B) The clientele effect exists.
C) The information effect exists.
D) Tax deferral on capital gains exists.
71) The “bird-in-the-hand dividend theory”
supports which view of the effect of dividend policy on company value?
A) A firm’s dividend policy is irrelevant.
B) High dividends increase stock values.
C) Low dividends increase stock values.
D) Constant dividends increase stock values.
72) The viewpoint that low dividends increase stock value
is based on which of the following principles?
A) time value of money
B) risk-return trade-off
C) taxes bias business decisions
D) the agency problem
73) The viewpoint that high dividends increase stock values
is based on which of the following principles?
A) time value of money
B) risk-return trade-off
C) taxes bias business decisions
D) the agency problem64) Which of the following statements would be consistent
with the bird-in-the-hand dividend theory?A) Investors are indifferent whether stock returns come
from dividend income or capital gains income.B) Dividends are more certain than capital gains income.C) Wealthy investors prefer corporations to defer dividend
payments because capital gains produce greater after-tax income.D) Dividends are less certain than capital gains. 65) Which of the following statements would be consistent
with the residual dividend theory?A) Wealthy investors prefer corporations to defer dividend
payments because capital gains produce greater after-tax income.B) Dividends are more certain than capital gains.C) Dividends should only be paid if a firm has profits in
excess of the amount needed to finance the current year’s capital investments.D) Investors are indifferent whether stock returns come
from dividend income or capital gains income. 66) Assume that a firm has a steady record of paying high
dividends for years. A new management team decided to cut the current year’s
dividend in half without disclosing why. The market value of the stock fell 35%
on the day the dividend cut was announced. Which of the following would best
explain the stock market’s reaction to the announcement?A) empirical theoryB) dividend irrelevance theoryC) residual dividend theoryD) information effect 67) Assume that a firm has a steady record of paying stable
dividends for years. Market analysts had expected management to increase the
dividend by 7.5% in the latest quarter. However, management announced a 15%
increase in the current year’s dividend. The market value of the stock rose 20%
on the day of the announcement. Which of the following would best explain the
stock market’s reaction to the announcement?A) expectations theoryB) dividend irrelevance theoryC) residual dividend theoryD) agency theory 68) Assume that the tax on dividends and the tax on capital
gains is the same. All else equal, what would a prudent investor prefer?A) The prudent investor would be indifferent between
receiving dividends or capital gains.B) The prudent investor would prefer dividendsa dollar
today is always worth more than a dollar to be received in the future.C) The prudent investor would prefer capital gainsthe
capital gain tax liability can be deferred until gains are realized.D) More information is needed. 69) Which of the following is (are) true?A) In general, the higher the number of positive NPV
investment opportunities for a firm, the lower the dividend payout ratio.B) If the clientele effect is correct, firms should follow
a constant dividend payout ratio policy.C) According to the informational content of dividends, an
increase in dividends is always a positive signal.D) In industries with volatile earnings, the residual
dividend policy results in the most consistent dividend stream. 70) Which of the following is true if dividend policy is
irrelevant?A) Perfect capital markets exist.B) The clientele effect exists.C) The information effect exists.D) Tax deferral on capital gains exists. 71) The “bird-in-the-hand dividend theory”
supports which view of the effect of dividend policy on company value?A) A firm’s dividend policy is irrelevant.B) High dividends increase stock values.C) Low dividends increase stock values.D) Constant dividends increase stock values. 72) The viewpoint that low dividends increase stock value
is based on which of the following principles?A) time value of moneyB) risk-return trade-offC) taxes bias business decisionsD) the agency problem 73) The viewpoint that high dividends increase stock values
is based on which of the following principles?A) time value of moneyB) risk-return trade-offC) taxes bias business decisionsD) the agency problem
Our website has a team of professional writers who can help you write any of your homework. They will write your papers from scratch. We also have a team of editors just to make sure all papers are of HIGH QUALITY & PLAGIARISM FREE. To make an Order you only need to click Ask A Question and we will direct you to our Order Page at WriteDemy. Then fill Our Order Form with all your assignment instructions. Select your deadline and pay for your paper. You will get it few hours before your set deadline.
Fill in all the assignment paper details that are required in the order form with the standard information being the page count, deadline, academic level and type of paper. It is advisable to have this information at hand so that you can quickly fill in the necessary information needed in the form for the essay writer to be immediately assigned to your writing project. Make payment for the custom essay order to enable us to assign a suitable writer to your order. Payments are made through Paypal on a secured billing page. Finally, sit back and relax.
About Writedemy
We are a professional paper writing website. If you have searched a question and bumped into our website just know you are in the right place to get help in your coursework. We offer HIGH QUALITY & PLAGIARISM FREE Papers.
How It Works
To make an Order you only need to click on “Order Now” and we will direct you to our Order Page. Fill Our Order Form with all your assignment instructions. Select your deadline and pay for your paper. You will get it few hours before your set deadline.
Are there Discounts?
All new clients are eligible for 20% off in their first Order. Our payment method is safe and secure.