Reference no: EM13370427

1. Dividend changes can be used by management as a credible communication tool to signal investors about future earnings under which of the subsequent dividend policy theories?
the clientele effect
the information effect
the residual dividend theory
the expectations theory

2. The final approval of a dividend payment comes from
the president of the company.
the controller.
the board of directors.
It is a joint decision requiring approval from all of the above.

3. Sweet Tooth Bakery bakes and sells pies. Sweet Tooth has yearly fixed costs of $880,000 and a variable cost per pie of $7.50. Every pie sells for $15.50 each. The firm expects to sell 500,000 pies annually. Find what is the break-even point in sales dollars?
$3,100,000
$2,875,000
$1,705,000
$1,625,000

4. Which of the subsequent will result from a stock repurchase?
Number of shares will increase.
Earnings per share will rise.
Corporate cash is conserved.
Ownership is diluted.

5. Sweet Tooth Bakery bakes and sells pies. Sweet Tooth has annual fixed costs of $880,000 and a variable cost per pie of $7.50. Every pie sells for $15.50 each. The firm expects to sell 500,000 pies yearly. Evaluate what is the break-even point in pies?
190,440
200,000
280,000
110,000

6. Bob's Baked Goods Company reported the subsequent income statement for 2009:
Sales $2,500,000
Fixed Operating Costs 700,000
Variable Costs 900,000
EBIT 900,000
Interest Expense 200,000
Taxes (30%) 210,000
EBT 700,000
Net Income $490,000
Earnings Per Share $4.90

If Bob's sales subsequently year increase by 20 percent, what will Bob's earnings per share be?
$5.76
$6.45
$7.14
$7.58

7. A high degree of variability in a firm's earnings before interest and taxes refers to
business risk.
financial risk.
financial leverage.
operating leverage.

8. Based on data contained in Table A, Find what is the break-even point in units produced and sold?

TABLE A

Average selling price per unit $18.00
Variable cost per unit $13.00
Units sold 400,000
Fixed costs $650,000
Interest expense $ 50,000
130,000
140,000
150,000
180,000

9. Suppose that the tax on dividends and the tax on capital gains is the same. All else equal, evaluate what would a prudent investor prefer?
The prudent investor could be indifferent between receiving dividends or capital gains.
The prudent investor should prefer dividends a dollar today is always worth more than a dollar to be received in future.
The prudent investor could prefer capital gains the capital gain tax liability will be deferred until gains are realized.

10. Benkart's Tire Store has fixed costs of $220,000. Tires sell for $95 every and have a unit variable cost of $45. Find what is Benkart's break-even point in units?
4,000
5,200
4,400
5,500