Question
13. Which of the following statements is FALSE? 1) While cutting the dividend is costly for managers in terms of their reputation and the reaction
13. Which of the following statements is FALSE?
1) While cutting the dividend is costly for managers in terms of their reputation and the reaction of investors, it is by no means as costly as failing to make debt payments. O2) Firms adjust dividends relatively infrequently, and dividends are much less volatile than earnings. This practice of maintaining relatively constant dividends is called dividend signaling. O3) While an increase of a firm's dividend may signal management's optimism regarding its future cash flows, it might also signal a lack of investment opportunities. O4) When a firm increases its dividend, it sends a positive signal to investors that management expects to be able to afford the higher dividend for the foreseeable future
14. An investment that provides annual cash flows of $20,100 for 8 years costs $87,500 today. At what rate would you be indifferent between accepting the investment and rejecting it?
01) 15.90% O2) 17.60% O3) 15.93% 04) 15.51%
15. You own one share of a cumulative preferred stock that pays quarterly dividends. The firm has recently suffered some financial setbacks and has failed to pay the last dividend. However, new funding has been arranged and the firm intends to restore all dividends, both common and preferred, this quarter. As a preferred shareholder, you should expect to receive the equivalent of quarter(s) of dividends when the next dividend is paid.
1) either 1, 2, or 3 2)0 3) 1 4) 2
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