Name: 28. Which of the following statements about dividend policies is CORRECT? a One key advantage of the residual dividend model is that it enables a company to b. The a stable dividend policy clientele effect suggests that companies should follow a stable dividend policy e reason that companies tend to favor distributing excess cash as dividends rather than repurchasing stock is that dividends are normally taxed at a lower rate than gains on repurchased stock d. Miller and Modigliani argued that investors prefer dividends to capital gains because are more certain than capital gains. They call this the "bird-in-the-hand effect. 29. T oombs Media Corp. recently completed a 3-for-1 stock split. Prior to the split, its stock sold for $80 per share. Th estimate of the stock's post-split price? a. $26.67 b. $25.33 . $22.40 d. $30.67 e firm's total market value was unchanged by the split. Other things held constant, what is the best Southwest U's campus book store sells course packs for S17 each, the variable cost per pack is $7, fixed cost to produce the packs are $200,000, and expected annual sales are 43,000 packs. What are the pre-tax profits from sales of course packs? a. $230,000 b. $223,100 c. $232,300 d. $257,600 30. 31. Which of the following statements is CORRECT? One of the benefits to a firm of being at or near its target capital structure is that this a. generally minimizes the risk of bankruptey b. A firm's business risk is determined solely by the financial characteristics of its industry c. The factors that affect a firm's business risk include industry characteristics and economic conditions, both of which are generally beyond the firm's control. d. A firm's financial risk can be minimized by diversification. a. Sunk costs are not included in the annual cash flows, but they must be deducted from the b. A proposed project's estimated net income as determined by the firm's 32. Which of the following rules is CORRECT for capital budgeting analysis? PV of the project's other costs when reaching the accept/reject decision. accountants using generally accepted accounting principles (GAAP), is discounted at the WACC, and if the PV of this income stream exceeds the project's cost, the project should be accepted. c. The interest paid on funds borrowed d. Only incremental cash flows, which are the cash flows that would result if a project is to finance a project must be included in estimates of the project's cash flows. accepted, are relevant when making accept/reject decisions for capital budgeting projects