Quiz_ Quiz 7_ Capital Structure and Dividend Policy

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01/04/2023, 22:16 Quiz: Quiz 7: Capital Structure and Dividend Policy https://canvas.ubc.ca/courses/105711/quizzes/570490/take 1/4 Quiz 7: Capital Structure and Dividend Policy Started: Mar 31 at 7:25a.m. Quiz Instructions For this Quiz answer the questions using an excel document or financial calculator. ( I recommend you use a spreadsheet for your calculations. You will be allowed to use either a calculator or spreadsheet to solve similar problems on the mid term and final exams ). You have 3 attempts on this quiz, highest score counts. There is no time limit. The correct answers will be available the next day. Your answers should be accurate to the nearest cent (unless advised otherwise) for all monetary amounts and to 4 decimal places (set your calculator to six decimal places) for all other answers (unless advised otherwise). Do NOT use unit symbols ($,%), spaces or commas in your fill in the blank answers . It is highly recommended that you document (write or type) your answers to the question showing the equations used and the calculator steps followed in a separate document. This will allow you to check your work against the assignment answers in Canvas and assist you in future studying for the midterm and final exams. For complex problems, it is also useful to draw a timeline to modeling the cash flows. 1 pts Question 1 19.92% 22.08% 23.42% 27.12% In 2015, Toronto Skaters earned a return on investment (ROI) of 15% and had a cost of debt of 7 percent. The book value of debt was $25,000 and the book value of shareholders’ equity was $30,000. The firm faces a tax rate of 30 percent. The firm’s return on equity is: 1 pts Question 2 $10,000 $6,000 $4,000 $2,000 Determine the EPS indifference EBIT level for Poutine Company for the following two scenarios: A debt/equity ratio of .6, pre-tax cost of debt is 8 percent, annual interest payments are $2,000, and the company has 1,000 shares outstanding. In scenario 2, the firm is all equity financed and has 1,500 shares outstanding. The tax rate is 40 percent for both scenarios. The EPS indifference EBIT level for Poutine Company is: 1 pts Question 3 the firm's financing strategy. the amount of dividends paid out. the market value of the debt. none of the above. The effect of financial leverage on ROE depends on: 1 pts Question 4 higher coverage ratios. higher cash flow to debt ratios. lower return on assets. higher profit margin. Compared to non-investment grade firms, investment grade firms, in general, do not exhibit:
01/04/2023, 22:16 Quiz: Quiz 7: Capital Structure and Dividend Policy https://canvas.ubc.ca/courses/105711/quizzes/570490/take 2/4 1 pts Question 5 the coverage of expenses associated with debt with operating income. the return on investment capital. the magnitude of historical capital expenditure over the years. none of the above. Fixed burden coverage ratio measures: 1 pts Question 6 act in the best interests of the company. always act in the best interests of the shareholders. always act in the best interests of all stakeholders including creditors. act in the best interests of the managers of the firm. The board of directors of a Canadian firm must: 1 pts Question 7 Internal cash flow, issue debt, issue equity Internal cash flow, issue equity, issue debt Issue debt, internal cash flow, issue equity Issue debt, issue equity, internal cash flow The pecking order theory of capital structure suggests that firms follow which order when raising capital? 1 pts Question 8 III, I, II, IV III, IV, I, II I, III, II, IV IV, I, II, III Place the following dates in chronological order from the earliest to the latest: I. Holder of record date II. Payment date III. Declaration date IV. Ex-dividend date 1 pts Question 9 February 2, 2015 March 13, 2015 On January 1, 2015, you purchased 100 shares of Toronto Skaters Company. On February 1, 2015, the company declared a dividend of $2 per share for shareholders of record on March 15, 2015, payable on April 1, 2015. Assume the ex-dividend date is March 13, 2015. If you wished to receive the dividend, you cannot sell your shares before:
01/04/2023, 22:16 Quiz: Quiz 7: Capital Structure and Dividend Policy https://canvas.ubc.ca/courses/105711/quizzes/570490/take 3/4 March 16, 2015 April 2, 2015 1 pts Question 10 Cash dividend Stock dividend Reverse stock split None of the above result in a decrease in the number of shares outstanding Which of the following would result in a decrease in the number of shares outstanding and an increase in the earnings per share? 1 pts Question 11 DRIPs allow investors to use dividends to buy new shares, while a stock dividend is a dividend paid in additional shares. Stock dividends allow shareholders to purchase additional shares with their dividends at a special discount, whereas a DRIP allows shareholders to purchase shares at the market price. DRIPs allow shareholders to buy additional shares at a discount, whereas with a stock dividend shareholders receive no discount. Stock dividends are voluntary whereas DRIPs are mandatory. A dividend reinvestment plan (DRIP) differs from a stock dividend in which way? 1 pts Question 12 The amount of a stock dividend is fully taxable, whereas there is no tax implication with a stock split. Stock dividends increase the number shares greater than 25 percent, whereas stock splits increase shares by less than 25 percent Stock splits always increase the average share price whereas for stock dividends the price would remain the same Stock splits have an impact on retained earnings, whereas stock dividends have no impact A stock dividend differs from a stock split, in that: 1 pts Question 13 The economic benefit for the firm The increase in the number of shares where the price stays the same Trading price at an acceptable level for small investors Trading price at the penny stock level What is the most probable reason for stock splits? 1 pts Question 14 40,000 100,000 250,000 Toronto Skaters Company currently has 100,000 shares outstanding. It has just declared a 5 for 2 stock split. After the split, the number of shares outstanding will be:
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01/04/2023, 22:16 Quiz: Quiz 7: Capital Structure and Dividend Policy https://canvas.ubc.ca/courses/105711/quizzes/570490/take 4/4 No new data to save. Last checked at 10:16pm 500,000 1 pts Question 15 100,000; 100,000 90,000; 100,000 100,000; 110,000 110,000; 90,000 Saguenay Resort Inc. and Gaspésie Spa Inc. both have 100,000 shares outstanding and both stocks trade for $10 per share. Saguenay Resort Inc. pays a dividend of $1 per share while Gaspésie Spa Inc. pays a 10% stock dividend. After the dividends are paid, the number of shares outstanding for Saguenay Resort Inc. and Gaspésie Spa Inc., respectively, are: 1 pts Question 16 Increase when share prices increase and dividends remain stable Are similar among Canadian firms Increase when dividends increase and share prices remain stable Are always greater than 5% Dividend yields: Submit Quiz