QUESTION 1

ABC Inc. plans to incur $24M in capital expenditures next year and it expects the net income to be $50M. It current debt ratio is 30% and wishes to maintain it in the next year. ABC Inc. follows the residual distribution model. What will be the maximum dividend payout ratio be next year? Assume all distributions as dividends.

	A.	30.00%
	B.	33.30%
	C.	56.50%
	D.	66.40%
	E.	80.20%

QUESTION 2

A firm that has an established clientele of investors who prefer large dividends is likely to adopt a residual dividend policy.

True

False

QUESTION 3

The current price of ABC Inc. is $80 per share. The current dividends per share is $2.00. You own 100 shares of ABC Inc. If ABC Inc. were to announce 4-for-1 stock split, what would you expect the dividends per share to be right after the split?

	A.	$2.00
	B.	$1.50
	C.	$6.00
	D.	$8.00
	E.	$0.50

QUESTION 4

The current price of ABC Inc. is $80 per share. The current dividends per share is $2.00. You own 100 shares of ABC Inc. If ABC Inc. were to announce 4-for-1 stock split, what would you expect the stock price to be right after the split?

	A.	$80
	B.	$15
	C.	$20
	D.	$310
	E.	None of the above

QUESTION 5

Other things held constant, increase in investment opportunities for a firm will lead to a higher dividend payout ratio.

True

False

QUESTION 6

Whenever a firm's investment opportunities improve and if the firm follows a residual dividend policy, then holding all else constant, its dividend payout ratio will tend to rise.

True

False