Need help with a 20 question homework. Solutions and formulas necessary to complete the work will be greatly appreciated

Fin 4200 HW 4 1. The stock price should fall by the amount of the dividend on the ______________. a) b) c) d) Declaration Date Ex-Dividend Date Record Date Payment Date 2. If investors prefer capital gains to dividends (Tax Preference theory is true), then a) b) c) d) The firm's stock price will decrease as the retention rate increases The firm's stock price will decrease as the payout ratio decreases The firm's stock price will increase as the retention rate decreases The firm's stock price will increase as the payout ratio decreases 3. Which of these is most likely to have a negative impact on stock price? a) b) c) d) The announcement of a dividend reinvestment plan The announcement of a tender offer share repurchase plan The announcement of a two-for-one stock split The announcement that the company plans to issue new stock 4. _______________ are when the firm announces that they will but back stock at various times over the next several years. a. b. c. d. Stock Dividends Open Market Repurchases Dividend Reinvestment Plans Tender Offer Repurchases 5. Which of the following statements is correct? a. If a firm repurchases its stock in the open market and then resells it later on at a higher price, then they will be subject to capital gains taxes. b. An open-market dividend reinvestment plan will be most attractive to companies that need new equity and would be looking to issue additional shares of common stock. c. Stock repurchases tend to increase financial leverage. d. If a company declares a 2-for-1 stock split, its stock price should roughly double. 6. Which of the following statements is correct? a. If a firm follows the residual dividend policy, then a sudden increase in the number of profitable projects is likely to reduce the firm's dividend payout during that year. b. The clientele effect can explain why many firms change their dividend policies so often. c. One advantage of adopting the residual dividend policy is that this policy makes it easier for corporations to develop a specific and well-identified dividend clientele. d. Stock dividends reduce the amount of equity on the firm's balance sheet. 7. A firm has Net Income of $500,000, a capital budget of $600,000, and a target debt ratio of 40%. If the firm follows a residual dividend policy, then what is their payout ratio? a. 28% b. 36% c. 48% d. 56% 8. A firm has a stock price of $60. If they have a 3-for-2 stock split and the stock price falls by 10%, then what is the new stock price? a. $18 b. $22 c. $36 d. $44 9. Which statement is TRUE? a) Under a sale and leaseback arrangement, the seller of the property is the lessor and the buyer is the lessee. b) A sale and leaseback arrangement is a type of operating lease. c) Operating leases help to shift the risk of obsolescence from the user to the lessor. d) Capital Leases are a form of Off-balance sheet financing 10. Which is statement is correct? a. b. c. d. Under financial leases, the lessor usually pays for maintenance. Capital leases can be cancelled Financial leases are generally long term and cover most of the economic life of the asset Under operating leases, the lessee expects to keep the asset after the lease ends 11. Masco is issuing new 15-year convertible bonds that can be exchanged for 40 shares of stock. If not for the convertibility feature, the bonds would carry a 9% interest rate. However, with the convertibility feature attached the bonds will pay a 7% annual coupon and can still be issued at the par value of $1,000. What is the value of the convertibility feature? a) $78 12. b) $161 c) $182 d) $217 Which of the following statements is NOT CORRECT? a. Owners of preferred stock have greater voting rights than common shareholders. b. From the investor's perspective, preferred stock is riskier than bonds. c. Companies are more likely to issue preferred stock if they have a low tax bracket since preferred stock dividends are not tax deductible. d. If a preferred issue is cumulative this means that any unpaid dividends are held in arrears. 13. Which is not an advantage of leasing (to the lessee)? a) b) c) d) Higher depreciation expenses Lower upfront costs Greater access to financing Less risk of owning obsolescent assets 14. Which of the following statements is CORRECT? a. Both warrants and convertibles are types of option securities. b. Convertibles bring in additional funds when converted, while warrants do not. c. Return on Assets will rise after a Convertible Bond is exchanged for equity. d. Off balance sheet financing may make a company appear less risky than it actually is because its stated debt ratio will appear lower. 15. Which statement is false? a) A convertible bond gives the bondholder the right to exchange their bonds for a preset number of shares of stock. b) A right is a bond with a call option held by the bondholder and thus has a higher price and a lower yield than similar bonds. c) A warrant is basically a long term option that is sold with bonds but that can be detached (bought and sold separately) from the bond d) Most preferred stock is owned by other companies due to the 70% exclusion of dividends. 16. A 10-year convertible bond has a face value of $1,000 and pays an annual coupon of $50. The bond's conversion price is $40. The issuing company's stock currently trades at $30 a share. The company can issue straight (non-convertible) debt with an 8% yield. Which of the following statements is CORRECT? a. The bond's conversion ratio is 20. b. The bond's conversion value is currently $750. c. The bond's straight-debt value is $750. d. The bond's straight-debt value is $1,000. 17. Which of the following statements is CORRECT? a. A warrant is basically a long-term option that enables the holder to sell common stock back to the firm at an agreed upon price, at a specified time in the future. b. Generally, warrants are distributed along with preferred stock in order to make the preferred stock less risky. c. If a company issuing coupon-paying debt wanted to reduce the cash outflows associated with the coupon payments, it could issue warrants with the debt to accomplish this. d. One of the disadvantages of warrants to the issuing firm is that they are detachable and can be traded separately from the debt with which they are issued. 18. A firm has 20,000,000 shares of stock outstanding at a price of $40 per share. They gave each shareholder the right to buy .25 shares of stock for $7 (4 rights would give them the right to buy one share for $28. How much is each right worth? a) $.83 b) $1.45 c) $1.94 d) $2.40 19. A firm has Net Income of 200,000 and 50,000 shares of common stock outstanding. However, they have 10,000 shares of Preferred Stock which received $2 per share in dividends. They also had warrants that can be converted into 20,000 shares of common stock for $25. Their current stock price is $30. They also have 600 bonds with a face value of 1,000 and a coupon rate of 6%. These bonds can be converted into15,000 shares of stock. Their marginal tax rate is 40%. What is their Primary EPS available to common shareholders? a) $2.37 b) $3.38 c) $3.6 d) $4.17 20. Which statement is TRUE? a) The \"preferred\" feature of preferred stock means that it normally will provide a higher expected return than will common stock. b) Preferred stock normally has no voting rights. However, most preferred issues stipulate that the preferred stockholders can elect a minority number of the directors if the preferred dividend is omitted. c) Preferred stock typically has a par value, but the par value has no real meaning d) Corporations that invest surplus funds in floating-rate preferred stock benefit from getting a relatively stable price, but they have to pay taxes on any preferred dividends received