FIN 534- WEEK 11 FINAL EXAM PART 2
Question 1
2 out of 2 points
Which of the following is NOT normally regarded as being a barrier to hostile
takeovers?
Answer
Selected Answer:
Abnormally high executive compensation.
Correct Answer:
Abnormally high executive compensation.
Question 2
2 out of 2 points
Which of the following is NOT normally regarded as being a good reason to establish an
ESOP?
Answer
Selected Answer:
To make it easier to grant stock options to employees.
Correct Answer:
To make it easier to grant stock options to employees.
Question 3
2 out of 2 points
Which of the following statements is correct?
Answer
Selected
Answer: Large stock repurchases financed by debt tend to increase earnings per
share, but they also increase the firm's financial risk.
Correct
Answer: Large stock repurchases financed by debt tend to increase earnings per
share, but they also increase the firm's financial risk.
Question 4
2 out of 2 points
,FIN 534- WEEK 11 FINAL EXAM PART 2
The capital budget of Creative Ventures Inc. is $1,000,000. The company wants to
maintain a target capital structure that is 30% debt and 70% equity. The company
forecasts that its net income this year will be $800,000. If the company follows a
residual dividend policy, what will be its total dividend payment?
Answer
Selected Answer:
$100,000
Correct Answer:
$100,000
Question 5
2 out of 2 points
Which of the following statements is correct?
Answer
Selected
Answer: Very often, a company's stock price will rise when it announces that it
plans to commence a share repurchase program. Such an announcement
could lead to a stock price decline, but this does not normally happen.
Correct
Answer: Very often, a company's stock price will rise when it announces that it
plans to commence a share repurchase program. Such an announcement
could lead to a stock price decline, but this does not normally happen.
Question 6
2 out of 2 points
Which of the following statements is NOT correct?
Answer
Selected
Answer: Stockholders pay no income tax on dividends if the dividends are used
to purchase stock through a dividend reinvestment plan.
Correct
Answer: Stockholders pay no income tax on dividends if the dividends are used
to purchase stock through a dividend reinvestment plan.
Question 7
2 out of 2 points
, FIN 534- WEEK 11 FINAL EXAM PART 2
Which of the following statements is correct?
Answer
Selected
Answer: If a company has an established clientele of investors who prefer a high
dividend payout, and if management wants to keep stockholders happy, it
should not follow the strict residual dividend policy.
Correct
Answer: If a company has an established clientele of investors who prefer a high
dividend payout, and if management wants to keep stockholders happy, it
should not follow the strict residual dividend policy.
Question 8
2 out of 2 points
Consider two very different firms, M and N. Firm M is a mature firm in a mature
industry. Its annual net income and net cash flows are both consistently high and stable.
However, M's growth prospects are quite limited, so its capital budget is small relative
to its net income. Firm N is a relatively new firm in a new and growing industry. Its
markets and products have not stabilized, so its annual operating income fluctuates
considerably. However, N has substantial growth opportunities, and its capital budget is
expected to be large relative to its net income for the foreseeable future. Which of the
following statements is correct?
Answer
Selected Answer:
Firm M probably has a higher dividend payout ratio than Firm N.
Correct Answer:
Firm M probably has a higher dividend payout ratio than Firm N.
Question 9
2 out of 2 points
Poff Industries' stock currently sells for $120 a share. You own 100 shares of the stock.
The company is contemplating a 2-for-1 stock split. Which of the following best
describes what your position will be after such a split takes place?
Answer
Selected
Answer: You will have 200 shares of stock, and the stock will trade at or near
$60 a share.
Correct
Question 1
2 out of 2 points
Which of the following is NOT normally regarded as being a barrier to hostile
takeovers?
Answer
Selected Answer:
Abnormally high executive compensation.
Correct Answer:
Abnormally high executive compensation.
Question 2
2 out of 2 points
Which of the following is NOT normally regarded as being a good reason to establish an
ESOP?
Answer
Selected Answer:
To make it easier to grant stock options to employees.
Correct Answer:
To make it easier to grant stock options to employees.
Question 3
2 out of 2 points
Which of the following statements is correct?
Answer
Selected
Answer: Large stock repurchases financed by debt tend to increase earnings per
share, but they also increase the firm's financial risk.
Correct
Answer: Large stock repurchases financed by debt tend to increase earnings per
share, but they also increase the firm's financial risk.
Question 4
2 out of 2 points
,FIN 534- WEEK 11 FINAL EXAM PART 2
The capital budget of Creative Ventures Inc. is $1,000,000. The company wants to
maintain a target capital structure that is 30% debt and 70% equity. The company
forecasts that its net income this year will be $800,000. If the company follows a
residual dividend policy, what will be its total dividend payment?
Answer
Selected Answer:
$100,000
Correct Answer:
$100,000
Question 5
2 out of 2 points
Which of the following statements is correct?
Answer
Selected
Answer: Very often, a company's stock price will rise when it announces that it
plans to commence a share repurchase program. Such an announcement
could lead to a stock price decline, but this does not normally happen.
Correct
Answer: Very often, a company's stock price will rise when it announces that it
plans to commence a share repurchase program. Such an announcement
could lead to a stock price decline, but this does not normally happen.
Question 6
2 out of 2 points
Which of the following statements is NOT correct?
Answer
Selected
Answer: Stockholders pay no income tax on dividends if the dividends are used
to purchase stock through a dividend reinvestment plan.
Correct
Answer: Stockholders pay no income tax on dividends if the dividends are used
to purchase stock through a dividend reinvestment plan.
Question 7
2 out of 2 points
, FIN 534- WEEK 11 FINAL EXAM PART 2
Which of the following statements is correct?
Answer
Selected
Answer: If a company has an established clientele of investors who prefer a high
dividend payout, and if management wants to keep stockholders happy, it
should not follow the strict residual dividend policy.
Correct
Answer: If a company has an established clientele of investors who prefer a high
dividend payout, and if management wants to keep stockholders happy, it
should not follow the strict residual dividend policy.
Question 8
2 out of 2 points
Consider two very different firms, M and N. Firm M is a mature firm in a mature
industry. Its annual net income and net cash flows are both consistently high and stable.
However, M's growth prospects are quite limited, so its capital budget is small relative
to its net income. Firm N is a relatively new firm in a new and growing industry. Its
markets and products have not stabilized, so its annual operating income fluctuates
considerably. However, N has substantial growth opportunities, and its capital budget is
expected to be large relative to its net income for the foreseeable future. Which of the
following statements is correct?
Answer
Selected Answer:
Firm M probably has a higher dividend payout ratio than Firm N.
Correct Answer:
Firm M probably has a higher dividend payout ratio than Firm N.
Question 9
2 out of 2 points
Poff Industries' stock currently sells for $120 a share. You own 100 shares of the stock.
The company is contemplating a 2-for-1 stock split. Which of the following best
describes what your position will be after such a split takes place?
Answer
Selected
Answer: You will have 200 shares of stock, and the stock will trade at or near
$60 a share.
Correct
