7.9 Review Questions: Chapter Seven
Review Questions: Chapter Seven
- State and explain all the various Dividend Policy Theories.
- How do Dividend- and Capital-Structure Policies interact? Use quantitative analysis.
- Do dividends matter? If so, to what do they matter?
- Absent taxes, what is the difference between paying a cash dividend versus using the same funds instead to buy back stock? State your reasonable assumptions. Create a numerical example.
- As an investor, do you care about dividends? Why or why not? Utilize a Valuation Model to support your own personal view.
- A company’s shares trade at $80 per share. It announces that it will split its shares 4/1. Joe owns 1,000 shares. After the split, how many shares will he own and at what value?
Selected Answers
Answer to Question #6:
| 4/1 Split | Pre- Split | Post – Split |
| Number of Shares | 1,000 | 4,000 |
| Price Per Share | $80 | $20 |
| Value of the Shares | $80,000 | $80,000 |