1. A company and its investment bank decide on the price and the number of shares that will be offered in the IPO:

a. based on the trading response for its IPO Pop.

b. by estimating the expected future cash flows.

c. by estimating the level of investor demand during the road show.

d. by comparing with competitors’ market capitalizations.

2. Which of the following statements related to dividends and repurchases is TRUE?

A. the dividend payout ratio of a firm that follows a residual dividend policy is likely to vary significantly from year to year

B. cash dividends are declared by the firm’s chief executive officer (CEO)

C stock prices typically rise on the day that a stock goes ex-dividend

D most tender offers to repurchase stock are made at a price slightly below the stock price that prevailed just before the announcement of the offer.