1 INCORRECT

A common stock dividend that results in a distribution of capital is called a(an) _____ dividend. A) B) C) D) cum extra cash special liquidating

stock distribution E) Feedback: The term cum dividend refers to the situation where a stock trades such that the purchaser is entitled to a declared dividend. Review sections 18.1 and 18.2.

2 CORRECT

A _____ is a cash payment made to shareholders from sources other than current or accumulated retained earnings. A) B) C) D) distribution stock dividend extra dividend special dividend

regular cash dividend E) Feedback: You are correct!

3 CORRECT

A stock dividend _____ the number of shares outstanding and a stock split _____ the number of shares outstanding. A) B) C) D) increases; increases increases; decreases decreases; increases does not change; increases

does not change; decreases E) Feedback: You are correct!

4 INCORRECT

When a cash payment is made to shareholders, as it has been at the end of each quarter for the past five years, it is called a _____ dividend. A) B) homemade special

C) D)

residual regular

liquidating E) Feedback: This term refers to dividends created by investors. Review section 18.3.

5 INCORRECT

You purchase 300 shares of DKA stock for $23.50 per share just before the market closes on Tuesday, October 12. The ex-dividend date is October 13. The quarterly dividend is $0.90 per share. Ignore taxes. Just after the market opens on the morning of October 13, your total wealth, all else equal, will be: A) B) C) D) $6,660. $6,780. $6,970. $7,050.

$7,320. E) Feedback: Your wealth will not change just because the stock went exdividend. Review section 18.2.

6 INCORRECT

When a shareholder acts on his or her own to alter a corporation's dividend policy by means of buying and selling shares of stock they are creating a _____ dividend. A) B) C) D) special regular residual homemade

liquidating E) Feedback: Homemade dividends are those created by the shareholders. Review section 18.3.

7 INCORRECT

Consider an all-equity firm. There are 40,000 shares of stock outstanding at a market price of $26.97 per share. Total earnings for the most recent year are $42,000. The firm has cash of $18,000 in excess of what is necessary to fund its positive net present value projects. The firm's other assets have a market value of $589,000. There are no transaction costs, taxes, or other market imperfections. Assume the firm pays the $18,000 excess cash out in the form of a cash dividend. What will the market price per share be after the dividend, all else constant? A) $26.32

B) C) D)

$26.52 $26.77 $26.97

$27.20 E) Feedback: Ignoring taxes, the market price should fall by the amount of the dividend. Review section 18.2.

8 INCORRECT

Which one of the following statements is correct? A) B) Dividends are declared by the CEO of a firm. A dividend is first considered as a liability of a firm on the payment date.

Based on NYSE rules, shares are sold ex-dividend on and after the third C) business day before the date of record. D) Dividends are distributed to shareholders on the date of record.

To receive a dividend, you must purchase a stock prior to the exE) dividend date so that you are recorded as the owner on the record date. Feedback: Dividends are declared by the board of directors. Review section 18.2.

9 INCORRECT

Henley Auto Parts announced the payment of an $0.85 per share with a record date of Wednesday, November 15. In order to receive the dividend, you must purchase the stock no later than: A) B) C) D) Wednesday, November 15. Tuesday, November 14. Monday, November 13. Friday, November 10.

Thursday, November 9. E) Feedback: This is the holder of record date. The stock trades ex-dividend prior to this date. Review section 18.2.

10 INCORRECT

On March 3, the board of directors of Iomega declared a dividend of $0.65 per share payable on Monday, March 25 to shareholders of record as of Monday, March 11. Under NYSE rules, if you bought 200 shares of Iomega stock on Wednesday, March 6 for $36.80 per share, how much would you receive in dividends on March 25? A) B) C) $0 $32.50 $37.50

D)

$130.00

$150.00 E) Feedback: The ex-dividend date is Thursday, March 7. Review section 18.2.