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problem1: JBC Corp. declared a dividend of dollar 2 per share, which was an increase of 25% from the prior year, yet JBC Corp. stock declined by 3 percent the day of the announcement. RBG Corp. announced a dividend of $2 per share, which was the same as the prior year, & its stock increased in value by 2 percent on the day of the announcement. These events could be most readily describeed by the _____.

[A] Expectations theory

[B] Residual dividend theory

[C] Information effect

[D] Clientele effect

problem2: According to the clientele effect, _____.

[A] Companies should change their dividend policies to please their target group of investors

[B] Even if capital markets are perfect, dividend policy still matters

[C] Companies should have dividend payout ratios of either 100% or 0%

[D] Companies should avoid making capricious changes in their dividend policies

problem3:  Which of the following statements would be consistent with the Dividend Irrelevance Theory?

[A] Investors are indifferent whether stock returns come from dividend income or capital gains income.

[B] There is no relationship between a firm's dividend policy and the value of its common stock.

[C] Perfect capital markets are assumed to exist which allow investors to buy and sell stock without incurring any transaction costs.

[D] all of the above

problem4: Dividend changes may be applied by management as a credible communication tool to signal investors about future earnings under which of the following dividend policy theories?

[A] The information effect

[B] The expectations theory

[C] The clientele effect

[D] The residual dividend theory

Basic Finance, Finance

  • Category:- Basic Finance
  • Reference No.:- M919454

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