Oran just noticed that the price of a stock in his portfolio went up after the company announced a larger than usual dividend.

The market's response to the company's decision is attributable to __________.

• a.)
• dividend irrelevance
• b.)
• information asymmetry
• c.)
• the dividend effect
• d.)
• capital gains

Why might investors prefer stock dividends over cash dividends?

• a.)
• If they are seeking short-term liquidity
• b.)
• If they are seeking flexibility
• c.)
• If they are seeking a stable share price
• d.)
• If they are seeking a predictable income stream

What does the residual dividend model assume about the relationship between dividends and share value?

• a.)
• It assumes that share value rises when dividends are consistent.
• b.)
• It assumes that share value rises when the target payout ratio is met.
• c.)
• It assumes that share values fall if no dividends are distributed.
• d.)
• It assumes there is no appreciable relationship.

Eadie owns 300 shares of stock in Company A that were valued at $2/share.

After Company A announces a 3-to-1 reverse stock split, Eadie calculates that she will own __________.

• a.)
• 900 shares valued at $0.67/share
• b.)
• 100 shares valued at $2/share
• c.)
• 900 shares valued at $2/share
• d.)
• 100 shares valued at $6/share