The market value of a firm's outstanding common shares will be higher, everything else equal, if Select the correct response: Investors expect lower dividend growth. Investors have a lower required return on equity. Investors have longer expected holding periods. Investors have shorter expected holding periods.
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- 2）In Miller and Modigliani's perfect world, what is likely to happen after a company announces a policy of high near-term dividends? A) Changes to the share price are unpredictable. B) The share price will decrease. C) There will be no change to the share price. D) The share price will increase.[28] Choose the correct answer w/ explanation. FINEX Corporation has common and preferred shares outstanding that recently paid a dividend of PhP 10 per share. Which of the following is correct? Both prices should be the same if markets are efficient and the required returns are the same Both prices should be the same since the dividends are the same The price of the common stock is expected to be higher if the required return on the common stock is lower than the required return on preferred stock The price of the common stock will be lower if dividends are not expected to grow3. Consider the following two statements: Statement 1: A firm can either pay its earnings to its investors, or it can keep them and reinvest them; Statement 2: According to the constant dividend growth model, the share price of the firm depends on the current dividend level, divided by the cost of equity capital plus the grow rate. Which one of the following combinations (true/false) relating to the above statement is correct? A. Statement 1 Statement 2 True True B. Statement 1 Statement 2 True False C. Statement 1 Statement 2 False False D. Statement 1 Statement 2 False True
- Q1 Which one of the followings is least important for dividend decisions A. Attract institutional investors B. Stability of future earnings C. Flotation cost of issuing new equity D. Maintaining consistency with historic dividend policy F. A sustainable change in earnings Q2 With a right offerings, each shareholder is issued an obligation to buy a specified number of new shares from the firm at a specified price within a specified time, after which the rights expire. True False10.Which of the following statement on stock valuation is incorrect?a.In dividend discount model, the stock value is the present value of all future dividends.b.We may use the dividend discount model to value all firms. c.Enterprise value is the sum of equity and debt minus cash. d.We may use price-earnings ratio to compute the value to comparable firms.A dividend valuation model such as the following is frequent. where: Pi = the current price of Common Stock i D1 = the expected dividend in Period 1 ki = the required rate of return on Stock i gi = the expected constant-growth rate of dividends for Stock i Identify the three factors that must be estimated for any valuation model, and explain why these estimates are more difficult to derive for common stocks than for bonds . Explain the principal problem involved in using a dividend valuation model to value: (1) companies whose operations are closely correlated with economic cycles. (2) companies that are of very large and mature. (3) companies that are quite small and are growing rapidly.
- (iii) Presently, your company’s Face Value of Equity Share RO 10 and Market Value of your Share in MSM is RO 25 per share. In order to increase the trading volume and market liquidity of your company stock, will you suggest the management to go for stock split? Explain your management about concept of stock slip with the advantage of splitting the stock of your company with the current scenario. (iv) Given the current scenario COVID 19 and its impact on Cement sector in the near future, what are the factors that you consider affecting the dividend policy of your company? Critically evaluate and justify.23. Suppose a stock is not currently paying dividends, and its management has announced that it will not pay a dividend for several years, but that it does expect to start paying dividends sometime in the future. Under these conditions, which of the following statements is most correct? a. The value of the stock can be found using DCF procedures by finding the present value of expected future dividends accounting for their timing and amount. b.Since it is expected to someday pay dividends, the value of the stock today can be found with this equation: P0 = D1/(r - g). c. Under these conditions, we can estimate a value for the stock, but we cannot use any form of the constant growth DCF model to do so. d. Such a stock should have a value of zero until it actually begins paying dividends.S. Bouchard and Company hired you as a consultant to help estimate its cost of common equity. You have obtained the following data: DO $0.85; PO $22.00; and g 6.00% (constant). The CEO thinks, however, that the stock price is temporanly depressed, and that it will soon rise to $34.00. Based on the DCF approach, by how much would the cost of common from retained earnings change if the stock price changes as the CEO expects?.