Answered: Evaluate the following statement: When…

Evaluate the following statement: When a firm pays dividend, its stock price decreases in the market. Therefore, it is always better to buy a stock on the date of dividend payment.

Auditing: A Risk Based-Approach (MindTap Course List)

11th Edition

ISBN:9781337619455

Author:Karla M Johnstone, Audrey A. Gramling, Larry E. Rittenberg

Publisher:Karla M Johnstone, Audrey A. Gramling, Larry E. Rittenberg

Chapter9: Auditing The Revenue Cycle.

Section: Chapter Questions

Problem 26CYBK

See similar textbooks

Related questions

Q: Alan makes deposits to an account at the end of every year for 12 years. His first deposit is $300…

A: Effective Annual Rate: The effective annual rate of interest is the actual or the real rate of…

Q: Kamryn Brown is single and earns $50,000 in taxable income and will use the following tax rate…

A: The question is related to the taxation of single individual as per the tax slab given.

Q: Yield to Maturity and Current Yield You just purchased a bond that matures in 15 years. The bond…

A: The current yield of the bond is calculated by determining the relation between the annual coupon…

Q: When evaluating a fund based on its cash-on-cash returns, what other considerations should you keep…

A: Cash on cash return: The entire return gained on a real estate investment property is measured…

Q: What is reinvestment risk (in the context of interest rate risk)? How does reinvestment risk impact…

A: A bank is a financial institution which is authorized to deposit money and provide loans. Financial…

Q: a. The after-tax cost of debt using the approximation formula is______%.(Round to two…

A: Here, To Find: Part A. The after-tax cost of debt using the approximation formula =? Part B. WACC…

Q: Jabari is planning for his retirement in 5 years’ time. He plans to deposit $200,000 immediately…

A: In this question, we have to calculate the future value of given annuity. Future value of annuity is…

Q: Ultra Petroleum (UPL) has earnings per share of $1.63 and a P/E ratio of 33.08. What’s the stock…

A: Earning per share = $1.63 P/E Ratio = 33.08

Q: ind the future values and the int arned for the following annuities very 2 months for 1 year, 8 mont…

A: Future values of annuities include the amount deposited and the interest being accumulated over the…

Q: Poultry Pete’s regularly purchases laying hens. The terms of payment are 3/15 net 60. Pete is not…

A: Cost of not taking discount=Discount rate100%-Discount rate×Number of days in a yearLast day of…

Q: A firm is expected to pay a dividend of $2.05 next year and $2.20 the following year. Financial…

A: Fundamental price is calculated using the formula and then it is compared with the actual price to…

Q: Summit Systems will pay an annual dividend of $1.59 this year. If you expect Summit's dividend to…

A: Gordon dividend growth model is used to value a stock who's dividends are expected to grwo at a…

Q: Suppose that the interest rate is 7 percent on euro-denominated assets of a one year maturity and 5…

A: First, we will take the spot rate then we will calculate the new exchange rate after taking…

Q: CIS is evaluating two programmes. Both programmes will require an initial invest GH1,300,000. Funds…

A: The term payback period refers to the time it takes to recover the cost of an investment. Simply…

Q: Rashmi has heard about shares and debenture but she is confused in between both terms as you are…

A: Shares represent ownership of the company. The company gets capital but in return provides the…

Q: Ann wants to buy a building. The asking price is $7,500,000. Her lender has a maximum LTV…

A: LTV means Loan To Value ratio. It is the maximum amount of loan that can be borrowed against the…

Q: Using the same information in #5, compute for the Equity Shareholder's Net Income

A: The Equity share holders' income: The difference between the consolidated net income and the…

Q: Select the correct choice below and fill in the answer box within your choice.

A: Loan Amount: It represents the credit given to the borrower by the lender. The borrower makes…

Q: QUESTION 8 You observe that the cap rate for Central Business District (CBD) office buildings in…

A: Data given:: Cap rate=4.25% Return on these building=8.25% Required:: Expected NOI growth rate of…

Q: setup in the finance system that ensures clear ownership of responsibilities. A. Macroprudential…

A: Finance system is nothing but group or cluster of institutions, such as Banking Company, Investment…

Q: Summarize the process of planning for financial management.

A: Financial management refers to the process of planning, organizing, directing and controlling the…

Q: Let us assume that an investor can obtain an 80% LTV loan for a property valued at 500,000 at a 10%…

A: Cashflow means movement of cash in an organization. Movement can be positive or negative. Positive…

Q: Your discount brokerage firm charges $8.20 per stock trade. How much money do you need to buy 220…

A: Brokerage charges = $8.20 Price per share = $29.42 Number of shares = 220 Amount need to buy 220…

Q: Wayne, Inc.'s outstanding common stock is currently selling in the market for $54. Dividends of…

A: Here, Market Price of Share is $54 Last Dividend Per Share is $3.16 Return on Equity is 35%…

Q: For the following $1,000-par-value bond, assuming annual interest payment and a 26% tax rate,…

A: The cost to maturity of a bond can be calculated using the approximation method. Under this method,…

Q: You just purchased a share of Northstar Sports for $104.82. You expect to receive a dividend of…

A: It is given that :current stock price - $104.82 Dividend (next yr)- $5.05 Price in 1 yr - $106.88

Q: aria has extra money, and she is planning to buy certain income-earning assets to help her earn…

A: There are many method of investing the money in the market depending on the need and objective of…

Q: A 5-year project will require an investment of $100 million. This comprises of plant and machinery…

A: Working Note #1 Calculation of depreciation: Year 1 2 3 4 5 Opening Balance ($) 80000000…

Q: Financial analysts forecast Safeco Corp.’s (SAF) growth rate for the future to be 8 percent.…

A: Growth rate (g) = 0.08 Last dividend (D0) = $1.25 Required return (r) = 0.10 Value of the stock (P0)…

Q: What is the outstanding balance in the 5th period? Period Regular Payment Interest Repayment of the…

A: Outstanding balance of 5th period: = Opening Balance of 5th period + Interest - Repayment

Q: How can she earn the time premium? I am very confused. How can she sell it without buying first?

A: Deep in the money is the option where expercise price is very lower than the the spot price. Time…

Q: Calculate the value of cost of goods sold for Benson's Brewing Company given the following…

A: Ratio is a tool which is used to measure the growth and performance of the firms and analyze the…

Q: A bond of Telink Corporation pays $120 in annual interest, with a $1,000 par value. The bonds…

A: Here, Annual coupon payment = $120 Par Value = $1,000 Time period = 15 years Yield to maturity = 8%…

Q: A machine which costs P100, 000 when new has a lifetime of 15 years and a salvage value equal to 20%…

A: In the business sector, capital recovery has numerous different meanings. It is largely concerned…

Q: Both Bond A and Bond B have 8% coupon rate. Bond A has 4 years to maturity, while Bond B is 14 years…

A: Here,

Q: What is the largest annual loan payment the lender will allow Ann to make based on the DSCR?

A: Loan Payment: These are payments made by the borrower to the lender for amortizing the amount of…

Q: Which of the follwing types of tax may not be shifted a. Percentage Tax b. Excise Tax c. Income Tax

A: The answer is Option c. Income Tax Income tax cannot be shifted.

Q: Which amount is worth more at 14 percent, compounded annusly $1,000 in hand today or $2.000 due in 6…

A: Future Value: The future value is the amount that will be received at the end of a certain period.…

Q: Which of the following is not a benefit associated with the NPV technique in capital budgeting?…

A: The best method for evaluation of an investment proposal is net present value method or discounted…

Q: A 15-year bond with 7.5% coupons paid semiannually will be redeemed at P1400. The bond is bought to…

A: Semiannual coupon rate = 0.0375 (i.e. 0.075 / 2) Semiannual yield (y) = 0.03 (i.e. 0.06 / 2)…

Q: Describe how adding a risk-free security to modern portfolio theory allows investors to do better…

A: A group of investment portfolios that are projected to produce the maximum returns at a given degree…

Q: Distributor Company A wants to determine the required rate of return on a stock portfolio with a…

A: Capital Asset Pricing Model (CAPM): CAPM is the method of calculating the expected return on…

Q: Solve with lump sum. A 13-year-old has his dad save$100of his birthday money for the next family…

A: The time value of money is applied when the future value of an equated amount deposited is to be…

Q: Question 2 The following interest rate structures are on offer by three independent banks: Tree…

A: For a borrower, the most preferable would be the bank that they have to pay the least interest to as…

Q: Suppose, on a certain day in February, a speculator observes the following prices in the foreign…

A: The following information has been provided in the question: GBP/USD spot=1.6465 March…

Q: You have just received a windfall from an investment you made in a friend's business. She will be…

A: Year 1 Cash flow = $26016 Year 2 Cash flow = $52032 Year 3 Cash flow = $78048 Interest rate = 0.114…

Q: A small group of SAS1 students form an investment club in order to put their vast mathematics of…

A: This problem can be solved in light of loan amortization and future value. Loan amortization can be…

Q: Ann wants to buy a building. The annual NOI for the building will be $100,000. She wants to get a 30…

A: Debt service coverage ratio is the measure of net operating income versus the annual debt repayment…

Q: A customer takes out a loan of $130,000 on January 1, with a maturity date of 36 months, and an…

A: Principal Amount, P = $130,000 Interest Rate, r = 11% = 0.11 Time, t = 1 month = 1 year Let us find…

Q: Assume that in a second run the ending inventory in process (FWIP) consists of 8,000 units.…

Question

Evaluate the following statement: When a firm pays dividend, its stock price decreases in the market. Therefore, it is always better to buy a stock on the date of dividend payment.

Expert Solution

This question has been solved!

Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.

SEE SOLUTION Check out a sample Q&A here

Step 1

VIEW

Step 2

VIEW

Step by step

Solved in 2 steps

SEE SOLUTION Check out a sample Q&A here

Knowledge Booster

Learn more about

Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, finance and related others by exploring similar questions and additional content below.

Similar questions

Which of the following will increase the price of a stock? Group of answer choices: A. Decrease in the required rate of return B. Decrease in the dividend growth rate C. Delay in the payment of dividends D. Decrease in earnings growth
The issue as to whether dividend policy has an effect on share prices raises a question as to whether dividends paid out to stockholders are any more “certain” than the expected future dividends the stockholders hope to receive from retention of firm earnings. This is known as the bird-in-the-hand theory of dividend policy. Do you agree with this theory? Explain.
"The dividend discount model is used to find the price of a stock based on the expected dividends received by the shareholder and the discount rate. Therefore, all else constant, the price of a share of stock will increase if the discount rate decreases." A) True B) False
How will the change in required return influence the price of a stock? How will the dividend growth rate influence the price of a stock?
How would you use the dividend yield model to value the price of a stock if it presently does not pay dividends but is expected to pay dividends in the future
Answer this question based on the dividend growth model. If you expect the required rate of return to increase across the board on all equity securities, then you should also expect: Group of answer choices An increase in all stock values. Negative stock values. An increase or a decrease in all stock values. A decrease in all stock values. All stock values to remain constant.
The dividend discount model is used by most equity analysts to determine a stock’s intrinsic value. The most popular of the models is the two-stage constant growth model. What is the rationale for valuing a firm using the two-stage dividend discount model versus other valuation methods?
Is stock with Increasing dividend yield and decreasing market price per share a good stock to invest?
All of the following is true about a Stock dividend except, Select one: a. The stock price declines proportionally after the dividend is paid b. The pre-dividend price is higher than the post-dividend price c. It is commonly expressed as a percentage d. The number of outstanding shares will decrease after a stock dividend.
If you bought a share of common stock, you would probably expect to receive dividends plus an eventual capital gain. Would the distribution between the dividend yield and the capital gain yield be influenced by the firm’s decision to pay more dividends rather than to retain and reinvest more of its earnings?
Illustrate the impact of changes in the dividend, the growth rate, the expected return on the market, and the beta on the value of a stock.
The short seller anticipates the stock price will __________, so that the share can be purchased later at a __________ price than it initially sold for. A. fall, higher B. fall, lower C. rise, higher D. rise, lower