Dividend Policy – Financial and Strategic Management MCQ

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Dividend Policy – Financial and Strategic Management MCQ

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The market price is ₹ 30 per share. Dividends are growing at 2%. The cost of equity is 10.5%. How much dividend must have been paid by the company at the beginning of the year or last year?

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The following information is available in respect of Hajela Ltd.:No. of shares outstanding: 3 lakh
Net profit: 18 lakh
Equity capitalization rate: 16%
Rate of return on investment: 20%
You are required to calculate the Dividend payout ratio to keep the share price at ₹ 42.

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The current price of the share of X Ltd. is ₹ 60 and the just paid dividend per share is ₹ 4. If the capitalization rate is 12%, what is the dividend growth rate?

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Small Events Incorporation has recently paid dividends of ₹ 3.50 per share. The dividends are growing at 10% p.a. and the equity capitalization rate applicable to the company is 12%. Find out the implicit P/E Ratio if the EPS of the company is ₹ 7.

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Take the data of the above question and calculate the total market value of the company.

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Rosa Ltd. has outstanding 1,20,000 shares selling at ₹ 20 per share. The company hopes to make a net income of ₹ 3,50,000 during the year. The company is thinking of paying a dividend of ₹ 2 per share at the end of the current year. The capitalization rate has been estimated to be 15%. On the basis of the MM model how many new shares the company must issue if the dividend is paid and the company needs ₹ 9,50,000 for an approved investment expenditure?

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The following details are available to you for Beauty Ltd.Internal rate of return 15%
Capitalization rate 15%
Earnings per share ₹ 12
Cash dividend per share ₹ 5 Calculates the value of an equity share.

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The net profit before tax of Acumen Ltd. is ₹ 17,50,000. The company has 1,00,000 equity shares of face value ₹ 10 each, fully paid-up. The current market price of the shares is ₹ 85 per share. Income-tax @30% applies to the company. Compute the P/E ratio for the company.

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An equity share of ₹ 100 is expected to earn an annual dividend of ₹ 10 and this share can be sold at a price of ₹ 180 at the end of the year. If the required rate of return is 12%, calculate the value of the equity share.

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Take the data above question and calculate the market value of the company after giving effect to the proposal as stated above.

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Damodhar Ltd. has ₹ 10 lakh equity shares outstanding. The current market price of the shares is ₹ 150 each. The board of directors of the company has recommended a dividend of ₹ 8 per share. The rate of capitalization is 12%. How many shares are to be issued as per MM Model at the end of the accounting year on the assumption that the net income is ₹ 2 Crore and the investment budget is ₹ 4 Crore and the dividend is declared as recommended by the directors.

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A Chemical company belongs to a risk class for which P/E Ratio is 10. It currently has 50,000 equity shares selling at ₹ 200 each. The firm is contemplating the declaration of dividend of ₹ 16 per share in the current fiscal year which has just started. Given the assumption of Modigliani-Miller, what will be the price of the share at the end of the year if the dividend is declared?

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The market price of Sara Ltd. is ₹ 1,000 per share. EPS is ₹ 20 per share. The cost of capital is 11%. The rate of return on investment is 12%. What is the dividend per share?

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The market price of Jhakas Ltd. is ₹ 200 per share as per Gordon Model. EPS is ₹ 20 per share. The cost of capital is 11%. The rate of return on investment is 12%. What is the retention ratio?

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DHC Ltd. is looking to purchase WIC Ltd., which has the following information: Revenue ₹ 40,00,000; EBITD ₹ 9,00,000; Basic EPS ₹ 1.40; Net assets ₹ 50,00,000 Dividends paid ₹ 0.50. Research has shown that the price-earnings ratio for companies like WIC Ltd. is 9.5. Based on that ratio, what is the value of WIC Ltd.?

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Company Q is all-equity financed. For each ₹ 1 of earnings, it consistently pays 30 paise in dividends and retains 70 paise for reinvestment. It expects to earn a rate of return of 14% on capital employed. According to the Gordon Growth Model, what would the rate of earnings growth be in the future? Ignore tax.

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Retention ratio is 0.55 and return on equity is 12.5% then growth retention model would be –

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If payout ratio is 0.45 then retention ratio will be:

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Ali Motors recently completed a 3 for 1 stock split. Prior to the split, the company had 10 million shares outstanding and its stock price was ₹ 150 per share. After the split, the total market value of the company’s stock equaled ₹ 1.5 Billion. What was the price of the company’s stock following the stock split?

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Retention ratio is 0.60 and return on equity is 15.5% then growth retention model would be –

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CPC Company’s stock is currently selling for ₹ 40 a share. The stock is expected to pay a ₹ 2 dividend at the end of the year. The stock’s dividend is expected to grow at a constant rate of 7% a year forever. The risk-free rate (RF) is 6% and the market risk premium (RM – RF) is also 6%. What is the stock’s beta?

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A share of common stock has just paid a dividend of ₹ 2.00. If the expected long-run growth rate for this stock is 15 percent, and if investors require a 19 percent rate of return, what is the price of the stock?

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Required return × Retention Ratio =?

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Which of the following would ultimately give the greatest benefit to stockholders?

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A company wants to buy back stock. How will this impact the company and its stock?

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When a firm is short of cash yet it wishes to distribute something to shareholders, it should consider –

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The fact that flotation costs can be significant is justification for:

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Which one of the following statements concerning cash dividends is correct?

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The difference between the highest and lowest prices at which a stock has sold is called the stocks:

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The target payout ratio is:

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The date by which a shareholder must be recorded as the shareowner in order to receive a declared dividend is called the:

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Market price =?

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Which one of the following is a non-cash payment made by a firm to its shareholders that dilute the value of each share of stock outstanding?

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As per the MM Model total value of the firm remains the same whether it declares dividends or not. You are required to state if the dividend is declared the market price per share as per MM Model –

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Which of the following is the correct formula to calculate market price as per MM Model?

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As per Walter’s Model when Ra > Rc decrease in retention ratio will lead to –

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As per Walter’s Model when Ra > Rc increase in dividend payout ratio will lead to –

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As per Walter’s Model when R = R market price will remain the same when –

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As per Walter’s Model when Ra < Rc decrease in retention ratio will lead to –

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As per Walter’s Model when Ra < Rc increase in dividend payout ratio will lead to –

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Company A and Company B both calculate their market price by using Walter’s formula. Both companies will have the same market price if –

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As per Gordon’s Model, whether the company adopts 50%, 80%, or any other payout ratio, the market price will remain the same when

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If you are calculating market price by using Gordon’s Model, increasing payout ratio other things renaming the same will –

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Consider the following two statements:(I) A company is experiencing ordinary growth and has high liquidity and much-unused borrowing capacity.
(It) A company with volatile and high business risk.
For each of the companies described above, would you expect it to have a high or low dividend payout ratio?

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Consider the following two statements:(I) A company with a large portion of inside ownership, all of whom are high-income individuals.(II) A growth company with an abundance of good investment opportunities.For each of the companies described above, would you expect it to have a high or low dividend payout ratio?

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Modigliani and Miller argue that the dividend decision

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Which of the following examples best represents a passive dividend policy?

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Regular Dividend Policy means___

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The dividend growth model can be used to compute the cost of equity for a firm in which of the following situations?I. Firms that have a 100% retention ratio.
II. Firms that pay a constant dividend.
III Firms that pay an increasing dividend
IV. Firms that pay a decreasing dividend.

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Consider the following two statements:(1) Buyback can be used by companies to defend against hostile takeovers since they increase the proportion of debt in a firm’s capital structure.
(2) After a 3-for-l stock split, a company’s price per share will fall and its number of shares outstanding will rise total value remaining the same.
Which of the above statement is correct?

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You currently own 100 shares of stock in Baba Ltd. Does the stock currently trade at ₹ 120 a share? The company is contemplating a 2:1 stock split. Which of the following best describes your position after the proposed stock split takes place?

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A stock split will cause a change in the total amounts shown in which of the following balance sheet accounts?

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Which of the following would not have an influence on the optimal dividend policy?

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The payout ratio is subtracted from one to calculate –

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A decrease in a firm’s willingness to pay dividends is likely to result from an increase in its –

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The primary goal of a publicly-owned firm interested in serving its stockholders should be to

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Historical growth rates, analysis forecasts, and retention growth model are approaches to estimate:

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If OML Corporation buyback 10% of its outstanding common stock from the secondary market, the result would be –

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The repurchase of stock is considered a decision rather than a decision.

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Forecast by analysts, retention growth model and historical growth rates are methods used for an –

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Which of the following techniques does not reward shareholders for investing in a company?

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All of the following are true of stock splits except:

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As per Modigliani-Miller hypothesis of dividend irrelevance price of share at year zero is –

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MCQ On Dividend Decision Question 6.Which of the following is an argument for the relevance of dividends?

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Dividend Decision MCQ Question 5.In retention growth model, percent of net income firms usually payout as shareholders dividends, is classified as –

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Dividend Policy MCQ Question 4.Retained earnings are –

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Dividend Policy MCQs With Answers Question 3.Which of the following factor will affect the dividend policy of the firm?
1. Insufficiency of cash
2. Firms contractual obligation
3. Ratio of debt to equity.4. Business cycle considerations

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MCQ On Dividend Policy Question 2.Dividend constitutes the cash flow that accrues to –

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Dividend policy determines___

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