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QUESTION: 1
TYPE: MULTIPLE CHOICE
[QUESTION BANK ID: 269594]
CORRECT
Which of the following statements is correct?
A
One advantage of dividend reinvestment plans is that they enable investors to avoid paying taxes on the dividends they receive
B
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
C
If a firm follows a strict residual dividend policy, then, holding all else constant, its dividend payout ratio will tend to rise whenever the firm’s
investment opportunities improve
D
If Congress eliminates taxes on capital gains but leaves the personal tax rate on dividends unchanged, this would motivate companies to increase
their dividend payout ratios
E
Despite its drawbacks, following the residual dividend policy will tend to stabilize actual cash dividends, and this will make it easier for firms to
attract a clientele that prefers high dividends, such as retirees
QUESTION: 2
TYPE: MULTIPLE CHOICE
[QUESTION BANK ID: 269596]
CORRECT
Langston Labs has an overall (composite) WACC of 10%, which reflects the cost of capital for its average asset. Its assets vary widely in risk, and Langston
evaluates low-risk projects with a WACC of 8%, average-risk projects at 10%, and high-risk projects at 12%. The company is considering the following projects
A High 15%
,
Your test grade is 93.33%
The professor has configured this test to allow students to:
Show Questions Answered Correctly
Show Questions Answered Incorrectly
Show All Responses Selected By Student
Show What The Correct Response Should Be
QUESTION: 1
TYPE: MULTIPLE CHOICE
[QUESTION BANK ID: 269594]
CORRECT
Which of the following statements is correct?
A
One advantage of dividend reinvestment plans is that they enable investors to avoid paying taxes on the dividends they receive
B
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
C
If a firm follows a strict residual dividend policy, then, holding all else constant, its dividend payout ratio will tend to rise whenever the firm’s
investment opportunities improve
D
If Congress eliminates taxes on capital gains but leaves the personal tax rate on dividends unchanged, this would motivate companies to increase
their dividend payout ratios
E
Despite its drawbacks, following the residual dividend policy will tend to stabilize actual cash dividends, and this will make it easier for firms to
attract a clientele that prefers high dividends, such as retirees
QUESTION: 2
TYPE: MULTIPLE CHOICE
[QUESTION BANK ID: 269596]
CORRECT
Langston Labs has an overall (composite) WACC of 10%, which reflects the cost of capital for its average asset. Its assets vary widely in risk, and Langston
evaluates low-risk projects with a WACC of 8%, average-risk projects at 10%, and high-risk projects at 12%. The company is considering the following projects
A High 15%
,
