2. Which of the following should not influence a firm's dividend policy decision?

a.)A strong preference by most shareholders for current cash income versus capital gains. b.)Constraints imposed by the firm's bond indenture. c.)The fact that Congress is considering changes in the tax law regarding the taxation of dividends versus capital gains. d.)The firm's ability to accelerate or delay investment projects. e.)The fact that much of the firm's equipment has been leased rather than bought and owned.

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

a.)Its access to the capital markets increases. b.)Its accounts receivable decrease due to a change in its credit policy. c.)Its stock price has increased over the last year by a greater percentage than the increase in the broad stock market averages. d.)Its earnings become more stable. e.)Its R&D efforts pay off, and it now has more high-return investment opportunities.

4. Reynolds Paper Products Corporation follows a strict residual distribution policy. All else equal, which of the following factors would be most likely to lead to an increase in the firm's distribution?

a.)The company increases the percentage of equity in its target capital structure. b.)The number of profitable potential projects increases. c.)Earnings are unchanged, but the firm issues new shares of common stock. d.)The firm's net income increases. e.)a and b.

5. If a firm adheres strictly to the residual distribution policy and the target capital structure, and all payments are in the form of dividends, then the issuance of new common stock during the year would suggest that

a.) the dividend payout ratio is increasing. b.)the dividend payout ratio is increasing faster than expected. c.) the dollar amount of investments has decreased. d.)no dividends were paid during the year. e.)a and d.