Question : 44. An investor owns 5,000 shares, which 1% of a corporation’s : 1284374

44. An investor owns 5,000 shares, which is 1% of a corporation’s outstanding stock before a stock repurchase. The investor did not sell any of his stock during the 25,000 share repurchase. Which of the following statements is correct? 
A. The investor still owns 1% of the corporation.
B. The stock’s price is likely to drop by 5%.
C. The investor owns more than 1% of the corporation.
D. The investor now has 5,250 shares.

45. Which of the following about dividends versus stock repurchases is true in the United States? 
A. The relative size of each has held constant since 1980.
B. The size of repurchases has grown relative to dividends since 1980.
C. The size of repurchases has shrunk relative to dividends since 1980.
D. The overall value of stock repurchases has remained constant since 1980.

46. In the United States, publicly traded corporations, in a given fiscal year, can: 
A. offer cash dividends but not stock repurchases.
B. offer stock repurchases only and not cash dividends.
C. offer stock repurchases only after any changes in cash dividends are declared.
D. offer both stock repurchases and dividends.

47. Which of the following signals is most likely to elicit a decrease in share price? 
A. A repurchase of 5% of the firm’s stock
B. An increase in the regular quarterly dividend
C. A decrease in the regular quarterly dividend
D. Borrowing funds in order to pay a cash dividend

48. An increase in dividends might not increase price and may actually decrease stock price if: 
A. the dividend increase cannot be sustained.
B. the firm does not maintain an exact dividend payout ratio.
C. the firm has too much retained earnings.
D. markets are weak-form efficient.

49. A policy of dividend “smoothing” refers to: 
A. maintaining a constant dividend payout ratio.
B. keeping the regular dividend at the same level indefinitely.
C. maintaining a steady progression of dividend increases over time.
D. alternating cash dividends with stock dividends.

50. Those economists feeling that low dividend payouts will increase share price focus on: 
A. the difficulty in predicting earnings.
B. superior reinvestment opportunities.
C. tax differentials between dividends and capital gains.
D. the cost of borrowing to maintain high payouts.

51. Which statement is true concerning the one-year after-tax return on the following stocks, assuming a 40% tax rate on dividends and a 20% tax rate on capital gains: Stock A is purchased for $50, offers a 5% dividend yield, and is sold for $56; stock B is purchased for $60, offers no dividend yield, but is sold after one year for $70. 
A. Stock A’s after-tax return is higher by 1.27%.
B. Stock B’s after-tax return is higher by .73%.
C. Stock A’s after-tax return is higher by .27%.
D. Stock B’s after-tax return is higher by .58%.

52. Capital gains may be preferred by investors over dividends even if their tax rates are equal because: 
A. taxes on dividends are withheld from paychecks.
B. taxes on capital gains are paid annually.
C. taxes on capital gains can be timed.
D. after-tax dividends are less certain than capital gains.

53. Compare the after-tax returns for a corporation that invests in preferred stock with a 12% dividend versus a common stock with no dividend but a 16% capital gain. The corporation’s tax rate is 35%. The: 
A. common stock returns 2.60% more than preferred.
B. preferred stock returns 0.34% more than common.
C. common stock returns 2.32% more than preferred.
D. returns are equal on an after-tax basis.