Chapter 15, Problem 10Q

a.

Summary Introduction

To explain: whether it is true or false if a firm repurchases its stock in open market and the shareholder who tender the stock are subject to capital gain taxes.

Introduction:

Dividend Policy: It is the rules and regulations or protocol which a company sets to share its earning with its shareholders Dividend’s payment include payment to be made legally as well as financially.

b.

Summary Introduction

To explain: whether it is true or false if holder of 100 shares will own 200 share after company’s stock splits 2 for 1.

c.

Summary Introduction

To explain: whether it is true or false if dividend reinvestment plan maximizes the amount of equity capital available to the firm.

d.

Summary Introduction

To explain: whether it is true or false that tax codes encourages company to pay a large percentage of their net income in the form of dividends.

e.

Summary Introduction

To explain: whether it is true or false if company’s investors who prefer large dividends is unlikely to adopt a residual dividend policy.

f.

Summary Introduction

To explain: whether it is true or false if all other things remain constant a firm’s dividend payout will tend to increase whenever the firm’s investment opportunities improve if it is following a residual dividend policy.