6.Clientele effect means different groups of investors, or clienteles, prefer different dividend policies.A firm's past dividend policy determines its current clientele of investors. So the Clientele effects help changing dividend policy.

True

False

7.What is the most correct implication of the additional funds needs (AFN)?

a. If AFN is negative, then you must secure additional financing.

b. If AFN is negative, then you have extra funds to pay off debt.

c. If AFN is positive, then you have extra funds to buy some short-term investments.

d. If AFN is positive, then you have extra funds to repurchase additional new stock.

8.A company expects $600 million of sales this year, and it forecasts a 15% increase for next year.The CFO uses this equation to forecast inventory requirements at different levels of sales:Inventories = $30.2 + 0.30(Sales).All dollars are in millions.What is the projected inventory turnover ratio for the coming year?

a. 3.40

b. 4.11

c. 3.26

d. 2.53

9.A company expects to have net income of $3,100,000 during the next year.Its target capital structure is 30% debt and 70% equity.The company has determined that the optimal capital budget for the coming year is $3,000,000.If Davis follows a residual distribution policy (with all distributions in the form of dividends) to determine the coming year's dividend, then what is Davis's dividend payout ratio?

a. 38.2%

b. 51.6%

c. 32.3%

d. 19.2%

10.A stock was trading at $200 per share before its recent 4-for-1 stock split. The 4-for-1 split led to a -10% change in the stock price. What was the stock price after the stock split?

a. $45.0

b. $180.0

c. $50.0

d. $55.0