1.

TRUE OR FALSE

A 100% stock dividend results in a doubling of the number of outstanding shares, but it does not affect the company's assets, profits, or total value.

2.

Which one of these statements is correct? A. Dividends tend to fluctuate in direct relation to changes in annual earnings. B. Managers are less concerned with the change in the dividend than with the actual amount of the dividend. C. Managers tend to avoid smooth dividends as they don't signal the firm's most recent successes. D. Managers tend to only increase dividends when they believe the increased amount can be sustained.

3.

How are investors most apt to interpret a reduction in a firm's regular dividend payment? A. Earnings are expected to decline. B. New investments are expected to increase. C. Stock repurchases are expected to increase. D. Share price is expected to increase.

4.

Based on the dividend growth model, the price of a stock will remain constant if the dividend is cut, provided that the: A. required return on the stock is proportionately increased. B. growth rate in dividends remains constant. C. reduction is offset by an increase in the growth rate. D. growth rate is decreased by the percent decrease in the dividend.

5.

When a firm announces a two-for-one stock split (in the absence of other new information), investors should expect that: A. the earnings per share will decrease by 50% but the stock price will remain constant. B. the stock price will decrease by 50% but earnings per share will remain constant. C. both the earnings per share and the stock price will remain the same. D. both earnings per share and the stock price will decrease by 50%.