Quiz Ch 14 – Stock Repurchases, Stock Splits, and Investor Perceptions
Fundamentals of Financial Management, Concise
Brigham and Houston
09th Edition
Among the options, which statement is INACCURATE?
Among the options, which statement is INACCURATE?
Which statement is accurate?
Which statement is accurate?
True or false: A consequence of the bird-in-the-hand theory of dividends is that if dividend yield decreases, it necessitates a growth increase surpassing the reduction in proportion to maintain a firm’s constant required return, assuming other factors remain unchanged.
True or false: Investors’ preference for high-payout firms, driven by the perceived dividend certainty over uncertain capital gains, has been challenged by Miller and Modigliani as the “bird-in-the-hand fallacy.” They argue that most dividends are reinvested in stocks, sharing risks with reinvested earnings.
True or false: For a retired individual relying on investment income, a preference for high-payout stocks is logical to obtain cash without selling stocks. Conversely, an individual inclined to reinvest dividends might opt for a low-payout company to reduce taxes and brokerage costs.
True or false: If a company announces a dividend of $1.50 per share on January 3, with payment set for January 31 to shareholders on record by January 17, then the stock price is expected to decrease by around $1.50 on January 15, the ex-dividend date.
True or false: The dividend irrelevance theory advanced by Miller and Modigliani is predicated on their assertion that the firm’s value is exclusively influenced by its fundamental earnings capability and business risk.
True or false: A declaration of a dividend on January 3, with a payout of $1.50 per share set for January 31, would generally lead to an approximate reduction of the stock’s price by around $1.50 on January 31.
True or false: Should the information content or signaling hypothesis prove accurate, a modification in a company’s dividend policy can indeed exert a significant impact on both its stock price and cost of equity.