1) Miller?s Hardware recently paid $1.21 per share in dividends. The company currently has excess cash and would like to distribute an additional $.35 a share to its shareholders. However, the company is concerned about increasing the dividend by that amount as it will not be able to afford a similar increase in the future and doesn't want to lower the dividend once it has been raised. Which one of the following is probably the best suggestion for distributing the $.35 per share?

Pay a special dividend of $.35 per share

Pay an extra cash dividend of $.35 per share

Pay a liquidating dividend of $.35 per share

Increase the regular dividend by $.12 and pay a special dividend of $.23

Increase the regular dividend by $.12 and pay an extra cash dividend of $23

2) Kelsey International declared a dividend on Friday, November 13, that is payable on Friday, December 11, to holders of record on Monday, November 30. What is the latest date that you can purchase this stock if you wish to receive this dividend? Assume there are no banking holidays within this period of time.

Tuesday, November 24

Wednesday, November 25

Thursday, November 26

Friday, November 27

Monday, November 30

3) Which one of the following would tend to favor a low-dividend payout?

Higher tax rates on capital gains than on dividend income

High flotation cost for equity issues

Endowment fund investors who cannot spend principal

Investors' desire for a high-dividend yield

Elimination of the tax deferral on capital gains