question 1:

A firm pays a fully franked cash dividend of $100 to one of its Australian shareholders who has a personal marginal tax rate of 40%. The corporate tax rate is 30%. What will be the shareholder's personal tax payable due to the dividend payment?

a.

21.4286

b.

10

c.

15

d.

57.1429

e.

14.2857

Question 2:

A company conducts the following capital payout and raising policies. Assume that there are no taxes, no signalling effects and no transaction costs. Which one of the following statements is NOT correct?

a.

1 for 2 bonus issue will increase the number of shares by 50% and decrease the share price by 50%.

b.

1 for 5 rights issue at a subscription price of $1 when the pre-announcement stock price was $3, will increase the number of shares by 20% and decrease the share price by 11.11%.

c.

10% stock buy-back will decrease the number of shares by 10%.

d.

Cash dividend is one capital payout policy.

e.

3 for 2 stock split will increase the number of shares by 50% and decrease the share price by 33.33%.