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A firm expects to have a 15 percent increase in sales over the coming year. If it has operating leverage equal to 1.25 and financial leverage equal to 3.50, then what will be the percentage change in EPS?
30%
47%
66%
15%
22%

For the past 10 years, Green Thumb Shrubbery has paid a very handsome dividend such that the dividend yield normally has been approximately 10 percent. The holder-of-record date for the next dividend payment is tomorrow. Sally Anderson just bought Green Thumb's stock a few minutes ago. As a result and assuming the stock's price has been stable for the past couple of days, the price Sally paid for her stock should have been:

A. greater than it was a couple of days ago because she will get the next dividend paid by Green Thumb, which is expected to be fairly substantial.
B. less than it was couple of days ago because she will not receive the next dividend paid by the company.
C. approximately the same as it was a couple of days ago because the stock's price has been stable and the next dividend should not affect the current price of the stock.
D. differ from what it was a couple of days ago because the prices of all stocks constantly fluctuate; but there is not enough information to determine whether the price will be higher or lower than it was previously.
E. None of the above is a correct answer.

Ducheyne Electric recently declared a 15 percent stock dividend. On the date of the stock dividend Ducheyne had 16 million shares outstanding priced at $46 per share in the market. An accounting entry was required on the balance sheet transferring some retained earnings to the common stock account. If retained earnings was $280 million prior to the transaction, what was the dollar amount of retained earnings after the transfer?
$280.0 million
$110.4 million
$234.0 million
$277.6 million
$169.6 million

Flavortech Inc. expects EBIT of $2,000,000 for the coming year. The firm's capital structure consists of 40 percent debt and 60 percent equity, and its marginal tax rate is 40 percent. The cost of equity is 14 percent, and the company pays a 10 percent rate on its $5,000,000 of long-term debt. One million shares of common stock are outstanding. In its next capital budgeting cycle, the firm expects to fund one large positive NPV project costing $1,200,000, and it will fund this project in accordance with its target capital structure. If the firm follows a residual dividend policy and has no other projects, what is its expected dividend payout ratio?
100%
60%
40%
20%
0%

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