上一主题:Reading 30: Dividends and Dividend Policy LOS f~ Q1-5
下一主题:Corporate Finance【 Reading 32】Sample
返回列表 发帖

Corporate Finance【 Reading 29,Reading30】

Which of the following statements regarding how different capital structure theories impact managers’ capital structure decisions is most accurate? According to:
A)
the static trade-off theory, debt will not be used if a company is in a high corporate tax bracket.
B)
pecking order theory, issuing new debt is preferable to issuing new equity.
C)
MM’s propositions (assuming no taxes), companies have an optimal level of debt financing.



Pecking order theory is related to the signals management sends to investors through its financing choices. Financing choices follow a hierarchy based on visibility to investors with internally generated funds being the least visible and most preferred, and issuing new equity as the most visible and least preferred. Under static trade-off theory, higher tax brackets result in greater tax savings from using debt financing. Under MM’s propositions (assuming no taxes), capital structure is irrelevant and there is no optimal level of debt financing.

The fresh new computer system will include what ex

the fresh new main system will likewise have got what exactly is labeled as dfsr product or maybe allocated data program duplication. this is an attribute utilized for home windows 8 server. this is the folder process algorithm this permits folder synchronization all around several computers. ,training
some three years later on,microsoft, house windows 7 arrived and additionally superior every one of the options along with the total eye snack in which vis must supply. i realize which you now could possibly be pondering perfectly,softwore, that is usually attractive to grasp however , the simplest way just modifying this kertas dinding may possibly enhance this productiveness? that could be an amazing topic; why don't we start with clearing up what precisely variables are able to develop your output.
quite a while after,training, your windows program 7 arrived and even increased every one of the options plus the attention junk food of which vis must supply. actually,microsoft, i know that will you now may just be thinking certainly, the only thing that can be excellent to grasp although just how really adjusting a picture might possibly improve my own work flow? which is an excellent challenge; today i want to start with showing what precisely elements may well boost your return.
.
related articles:

  
   think you're a good lover with home windows 7 comp
  
   a lot of desktops end users are extremely looking
  
   though old-fashioned charm bracelets are generally generally heading to possess
  
   article1110
  
   microsoft windows 8 main system will sustain a upp

TOP

Which of the following is most likely to be a symptom of a company that is able to sustain its cash dividend?
A)
Issuing new debt to fund projects and cover capital expenditures.
B)
A high dividend payout ratio compared to the industry average.
C)
A low dividend yield compared to the company's historic average.



High dividend yields compared to the company’s record suggest that investors are expecting dividends to be cut. Net borrowings are not sustainable, and will eventually require a cut in share repurchases and dividends. A higher-than-average dividend payout ratio creates the risk that dividends may be cut if earnings decline

TOP

Dividend safety is most likely evidenced by:
A)
Increase in dividend coverage ratio but not by FCFE coverage ratio.
B)
Increase in dividend and FCFE coverage ratios
C)
Increase in FCFE coverage ratio but not be dividend coverage ratio.



Both dividend and FCFE coverage ratios are indicators of dividend safety. FCFE coverage is simply more comprehensive measure and takes into account all cash distributed to shareholders

TOP

Grommetco produces plastic insulators for the electrical appliance industry. Excerpts from Grommetco’s financial results for 2010 are as follows:
Net Income (earnings)$10
Free Cash Flow to Equity$8
Dividends Paid$1
Stock Repurchases$3

Which of the following statements is most accurate? Grommetco’s:
A)
dividend payout ratio is 0.4.
B)
FCFE coverage ratio is 2.0.
C)
dividend coverage ratio is 2.5.



Dividend coverage ratio = Net Income / Dividends = $10 / $1 = 10.
FCFE coverage ratio = FCFE / (dividends + share repurchases) = $8 / ($1 + $3) = 2.0.
Dividend payout ratio = Dividends / Net Income = $1 / $10 = 0.1.

TOP

Dan Bridges, head of equity strategies for Paca Inc. a consultant to institutional investors makes the following statement:
Globally, the developed markets have seen a decline in dividend payout ratios over time. Lately, we have also seen an increase in the proportion of companies engaging in share repurchases.
Bridges’ statement is most likely:
A)
Incorrect as to dividend payout ratios.
B)
Incorrect as to companies engaging in share repurchases.
C)
Correct.



Bridges’ statement is correct.

TOP

Which of the following statements about differences observed in payout trends in US and Europe is most accurate?
A)
A higher proportion of US companies pay dividends as compared to their European counterparts.
B)
A lower proportion of US companies pay dividends as compared to their European counterparts.
C)
The percentage of companies making stock repurchases has been trending downwards both in the US and Europe.



A lower proportion of US companies pay dividends as compared to their European counterparts. The percentage of companies making stock repurchases has been trending upwards in the US (since 1980s), the UK and continental Europe (since 1990s).

TOP

What is the impact on shareholder wealth of a share repurchase versus cash dividend of equal amount when the tax treatment of the two alternatives is the same?
A)
A share repurchase will sometimes lead to higher total shareholder wealth than a cash dividend of an equal amount.
B)
A share repurchase is equivalent to a cash dividend of an equal amount, so total shareholder wealth will be the same.
C)
A share repurchase will always lead to higher total shareholder wealth than a cash dividend of an equal amount.



Assuming that the tax treatment of a share repurchase and a cash dividend of equal amount is the same, a share repurchase is equivalent to a cash dividend payment, and shareholder wealth will be the same.

TOP

Pearl City Breweries has 8 million shares outstanding that are currently trading at $34 per share. The company is choosing whether to distribute $22 million as dividends or to use the same amount to repurchase its shares. Ignoring tax effects, what will be the amount of total wealth from owning one share of Pearl City Breweries under each of these alternatives?
Cash dividendShare repurchase
A)
$34.00$34.00
B)
$31.25$37.00
C)
$31.25$34.00



If the company pays a cash dividend, the dividend per share will be $22 million/8 million = $2.75. The value of its shares will be:

So the total wealth from owning one share will be $31.25 + $2.75 = $34.00.
If the company repurchases shares, it can buy $22 million/$34 = 647,058 shares. The value of one share would then be:

If you remember that both a cash dividend and a share repurchase for cash leave shareholder wealth unchanged, this question does not require calculations of the amounts.

TOP

The following information is from the 10-k of Laura’s Chocolates, Inc.(LC), a maker of nut-based toffees.
Cash25,000,000
Share price40.00
Shares outstanding (prior to transaction)20,000,000
LC decides to spend $20 million repurchasing common stock. What is the value of a share of stock after the share repurchase?
A)
40.00.
B)
35.00.
C)
45.00.



TOP

返回列表
上一主题:Reading 30: Dividends and Dividend Policy LOS f~ Q1-5
下一主题:Corporate Finance【 Reading 32】Sample