Podcast
Questions and Answers
Which of these is NOT an assumption of Modigliani and Miller’s Dividend Irrelevance
Theory?
Which of these is NOT an assumption of Modigliani and Miller’s Dividend Irrelevance Theory?
- There are no transactions costs associated with converting shares into cash by selling them
- Firms can issue shares without incurring floatation or transaction costs
- There are no taxes at either a corporate or personal level
- Firms issue 5% of their earnings as dividends (correct)
Which one of the statements is NOT correct
Which one of the statements is NOT correct
- In a perfect capital market without taxes, the stock price will fall by exact the amount of the dividend on the ex-dividend date.
- Based on the dividend irrelevance view, share value is independent of the level of dividend paid by a company.
- Based on the dividend irrelevance view, dividend is important to shareholders, but the dividend policy and the timing of dividend is not important.
- According to the homemade dividend strategy, if a shareholder receives a greater dividend than desired, he or she can sell off extra shares of stock. (correct)
If next year’s dividend is 50p, the dividend growth rate is 3.5%, and the cost of equity is
12.5%, the price of the share is:
If next year’s dividend is 50p, the dividend growth rate is 3.5%, and the cost of equity is 12.5%, the price of the share is:
- 766.52
- 555.56 (correct)
- 564.95
- 685.67
Leslie purchased 100 shares of GT, Inc. stock on Wednesday, June 7th. Marti purchased
100 shares of GT, Inc. stock on Thursday, July 8th. GT declared a dividend on June 20th to
shareholders of record on July 12th and payable on August 1st. Which one of the following
statements concerning the dividend paid on August 1st is correct given this information?
[Note: Under NYSE rules, shares are traded ex dividend on and after the second business day
before the record date.]
Leslie purchased 100 shares of GT, Inc. stock on Wednesday, June 7th. Marti purchased 100 shares of GT, Inc. stock on Thursday, July 8th. GT declared a dividend on June 20th to shareholders of record on July 12th and payable on August 1st. Which one of the following statements concerning the dividend paid on August 1st is correct given this information? [Note: Under NYSE rules, shares are traded ex dividend on and after the second business day before the record date.]
All else equal, a stock dividend will _____ the number of shares outstanding and _____
the value per share.
All else equal, a stock dividend will _____ the number of shares outstanding and _____ the value per share.
If Assista Plc is currently trading at 2500p and will pay a dividend of 45p next year, what is
the company’s growth rate given that the cost of equity is 10%?
If Assista Plc is currently trading at 2500p and will pay a dividend of 45p next year, what is the company’s growth rate given that the cost of equity is 10%?
If no dividends are paid, shareholders who wanted cash, could generate a ‘homemade’
dividend by
If no dividends are paid, shareholders who wanted cash, could generate a ‘homemade’ dividend by
You owned 200 shares last year and received a stock dividend of 5% at the end of last
year. The number of shares you now have is _____ and your wealth has increased by ______
%.
You owned 200 shares last year and received a stock dividend of 5% at the end of last year. The number of shares you now have is _____ and your wealth has increased by ______ %.
The level of dividend paid by a company is:
The level of dividend paid by a company is:
