1. Which of the following is the most valid reason to split a stock that has a market price of $110 per share? (Points : 1)
Reduce the market price to a more popular trading ...
Obtain additional capital.
Increase investor's net worth.
2. The Modigliani and Miller hypothesis does not work in the "real world" because (Points : 1)
interest expense is tax deductible, providing an advantage to debt financing.
higher levels of debt increase the likelihood of bankruptcy, and bankruptcy has real costs for any corporation.
both A and B.
dividend payments are fixed and tax deductible for the corporation.
3. Based on the data contained in Table A, what is the break-even point in units produced and sold?
Average selling price per unit $18.00
Variable cost per unit $13.00
Units sold 400,000
Fixed costs $650,000
Interest expense $ 50,000 (Points : 1)
4. Dividend changes may be used by management as a credible communication tool to signal investors about future earnings under which of the following dividend policy theories? (Points : 1)
the clientele effect
the residual dividend theory
the information effect
the expectations theory
5. Moline Manufacturing Corporation reported the following items: Sales = $6,000,000; Variable Costs of Production = $1,500,000; Variable Selling and Administrative Expenses = $550,000; Fixed Costs = $1,350,000; EBIT = $2,600,000; and the Marginal Tax Rate =35%. Moline's break-even point in sales dollars is (Points : 1)
6. Bob's Baked Goods Company reported the following income statement for 2009:
Variable Costs 900,000
Fixed Operating Costs 700,000
Interest Expense 200,000
Taxes (30%) 210,000
Net Income $490,000
Earnings Per Share $4.90
If Bob's sales next year increase by 20%, Bob's EBIT will increase: (Points : 1)
20%, showing no operating leverage.
20%, showing no financial leverage.
over 35%, due to operating leverage.
over 35%, due to operating leverage and financial leverage.
7. The final approval of a dividend payment comes from (Points : 1)
the president of the company.
the board of directors.
It is a joint decision requiring approval from all of the above.
8. Sweet Tooth Bakery bakes and sells pies. Sweet Tooth has annual fixed costs of $880,000 and a variable cost per pie of $7.50. Each pie sells for $15.50 each. The firm expects to sell 500,000 pies annually. What is the break-even point in pies? (Points : 1)
9. JBC Corp. declared a dividend of $2 per share, which was an increase of 25% from the prior year, yet JBC Corp. stock declined by 3% the day of the announcement. RBG Corp. declared a dividend of $2 per share, which was the same as the prior year, and its stock increased in value by 2% on the day of the announcement. These events could be most readily explained by the (Points : 1)
residual dividend theory.
10. Which of the following will result from a stock repurchase? (Points : 1)
Earnings per share will rise.
Number of shares will increase.
Corporate cash is conserved.
Ownership is diluted.
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