This is a multiple choice quiz for FIN/534. I have posted just the correct answers

Quiz 8: Chapters 14 and 15

Question 1

Which of the following statements about dividend policies is correct?

Question 2

If a firm adheres strictly to the residual dividend policy, the issuance of new common stock would suggest that

Question 3

Which of the following statements is correct?

Question 4

Which of the following statements is CORRECT?

Question 5

Which of the following statements is correct?

Question 6

Which of the following should not influence a firm’s dividend policy decision?

Question 7

If a firm adheres strictly to the residual dividend policy, then if its optimal capital budget requires the use of all earnings for a given year (along with new debt according to the optimal debt/total assets ratio), then the firm should pay

Question 8

You own 100 shares of Troll Brothers’ stock, which currently sells for $120 a share.  The company is contemplating a 2-for-1 stock split.  Which of the following best describes what your position will be after such a split takes place?

Question 9

Myron Gordon and John Lintner believe that the required return on equity increases as the dividend payout ratio is decreased.  Their argument is based on the assumption that

Question 10

Which of the following statements is correct?

Question 11

Which of the following would be most likely to lead to a decrease in a firm’s dividend payout ratio?

Question 12

Which of the following statements is correct?

Question 13

Firm M is a mature firm in a mature industry.  Its annual net income and net cash flows are both consistently high and stable.  However, M’s growth prospects are quite limited, so its capital budget is small relative to its net income.  Firm N is a relatively new firm in a new and growing industry. Its markets and products have not stabilized, so its annual operating income fluctuates considerably.  However, N has substantial growth opportunities, and its capital budget is expected to be large relative to its net income for the foreseeable future. Which of the following statements is correct?

Question 14

Which of the following statements is correct?

Question 15

Which of the following statements is correct?

Question 16

Which of the following would increase the likelihood that a company would increase its debt ratio, other things held constant?

Question 17

Which of the following statements is CORRECT?

Question 18

Companies HD and LD have the same total assets, operating income (EBIT), tax rate, and business risk.  Company HD, however, has a much higher debt ratio than LD.  Also HD’s basic earning power (BEP) exceeds its cost of debt (rd).  Which of the following statements is CORRECT?

Question 19

Other things held constant, which of the following events is most likely to encourage a firm to increase the amount of debt in its capital structure?

Question 20

Which of the following statements is CORRECT?

Question 21

Which of the following statements is CORRECT?

Question 22

The firm’s target capital structure should be consistent with which of the following statements?

Question 23

Business risk is affected by a firm’s operations.  Which of the following is NOT associated with (or does not contribute to) business risk?

Question 24

If debt financing is used, which of the following is CORRECT?

Question 25

Which of the following events is likely to encourage a company to raise its target debt ratio, other things held constant?

Question 26

Companies HD and LD have identical tax rates, total assets, and basic earning power ratios, and their basic earning power exceeds their before-tax cost of debt, rd.  However, Company HD has a higher debt ratio and thus more interest expense than Company LD.  Which of the following statements is CORRECT?

Question 27

Which of the following statements is CORRECT?  As a firm increases the operating leverage used to produce a given quantity of output, this will

Question 28

Which of the following statements is CORRECT?

Question 29

Which of the following statements is CORRECT?

Question 30

Which of the following statements is CORRECT?