FIN 350 EXAM | QUESTIONS & ANSWERS (VERIFIED) | LATEST UPDATE | GRADED A+

t/f 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 ANSWER: f t/f 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 ANSWER: t t/f if a firm adopts a residual distribution policy, distributions are determined as a residual after funding the capital budget. therefore the better the firms investment opportunities the lower its payout ratio should be ANSWER: t t/f stock dividends and stock splits should at least conceptually, have the same effect on shareholders wealth ANSWER: t in the real world , dividends Deeagles - Stuvia US ANSWER: are usually more stable than earnings what will most likely lead to a decrease in a firms dividend payout ratio ANSWER: its R&D effort pay off and it now has more high-return investment opportunities t/f if the information content, or signalling hypothesis is correct, then changes in dividend policy can have ab important effect on the firms value and capital costs ANSWER: t if management wants to maximize stock price, and if it believes that the dividend irrelevance theory is correct, then it must adhere to the residual distribution policy ANSWER: f Managerial entrenchment ANSWER: when you have a weak manger and he has strong anti take over provisions with corporate and feels like he has little chance of being removed non precuniary benefits ANSWER: perks that are not actual cash payments such as lavish offices memberships to countriy clubs, corporate jets and execively large staffs greenmail Deeagles - Stuvia US ANSWER: when you repurchase stock form a potential acquirer at a higher price than the market price poison pills ANSWER: share holder rights provision that allow shareholders to purchase more company stock at a lower than market price restricted voting rights ANSWER: a provison that strips voitng rights from shareholders who own more than a specified amount of stock stock option ANSWER: An agreement that grants the owner the option to buy a given number of shares of stock, usually within a set time period.