Reference no: EM132729605

Problem 1. When a firm begins to pay dividends, what does the market think?

a. It depends on conditions in the market

b. The stock generally rises because a dividend payout provides credible evidence that the firm is doing well enough to distribute its excess cash to its shareholders.

c. The stock generally declines because it suggests that the firm cannot invest it funds for higher returns within the company itself.

d. The stock generally rises because mutual funds take greater interest in stocks that pay dividends.

e. The stock generally declines because dividends may lead to dilution.

Problem 2. Which of the following is not true regarding share repurchases?

a. Share repurchases are, in effect, a form of dividend payout to existing shareholders, because they lead to an increase in the stock's overall yield.

b. Share repurchases almost always lead to a higher stock price because it is anti-dilutive.

c. Share repurchases are less effective when the repurchase is undertaken as the stock hits new highs.

d. Share repurchases are one of five things that can be done with excess corporate cash.

e. Share repurchases are an indication that the company is defending against a buyout.