Part 6

User
Codi A Eby
Course
BA 520: Financial Strat/Tech(68796-W15)
Test
Part 6 Quiz
Started
1/16/15 3:25 PM
Submitted
1/23/15 12:13 PM
Status
Completed
Attempt Score
69 out of 75 points
Time Elapsed
164 hours, 48 minutes.
Instructions

Question 1
3 out of 3 points

The optimal distribution policy strikes that balance between current dividends and capital gains that maximizes the firm's stock price.

Correct Answer: True

Question 2
3 out of 3 points

The dividend irrelevance theory, proposed by Miller and Modigliani, says that provided a firm pays at least some dividends, how much it pays does not affect either its cost of capital or its stock price.

Correct Answer: False

Question 3
3 out of 3 points

MM's dividend irrelevance theory says that while dividend policy does not affect a firm's value, it can affect the cost of capital.

Correct Answer: False

Question 4
3 out of 3 points

If investors prefer firms that retain most of their earnings, then a firm that wants to maximize its stock price should set a low payout ratio.

Correct Answer: True

Question 5
3 out of 3 points

Stock dividends and stock splits should, at least conceptually, have the same effect on shareholders' wealth.

Correct Answer: True

Question 6
0 out of 3 points

A reverse split reduces the number of shares outstanding.

Correct Answer: True

Question 7
3 out of 3 points

If management wants to maximize its stock price, and if it believes that the dividend irrelevance theory is correct, then it must adhere to the residual distribution policy.

Correct Answer: False

Question 8
3 out of 3 points

In the real world, dividends

Correct Answer: are usually more stable than earnings.

Question 9
3 out of 3 points

Which of the following should not influence a firm's dividend policy decision?

Correct Answer: The fact that much of the firm's equipment has been leased rather than bought and owned.

Question 10
3 out