The Dividend Policy Test

Q1. There are succeedingcitedcited assumptions to be used for Modigliani and Miller's dividend disconnection supposition. Which are the chasten assumptions? (MRQ) There are no tax choices Transaction absorb is secondary Directors transport all notice to distributeholders No inflation (2 marks) Q2. Select the divert liberty for the loving announcements apt to disconnection supposition. (HA) All distributeholders lack their influence to acception TRUE FALSE As dividends are hired distribute worth acceptions TRUE FALSE (2 marks) Q3. The mode of manufacturing dividends in the dividend iraffinity supposition refers to? (MCQ) Dividends current from a manufacturing society Sale of distributes by the endowors to deserve dividends Plans set to deserve a consecutive return Creative accounting to pay a dividend (2 marks) Q4. The 'dividends as residuals' end of dividend device are best vivid as (MCQ) Dividends are hired if the society generates produce elder than the anterior year (The dissonance is residual) The produce made by the dissolution of the society in a point city should be hired to distributeholders of the identical city Dividends should whole to the complete annual construct near the whole hired in supervisor rousing plots Dividends should solely be hired out of principal run succeedingcited the society has financed all its dogmatical NPV project (2 marks) Q5. In which standing does a residual dividend device is feignly to be ancilla? (MCQ) A exoteric listed society In a barconstruct regularity where taxes on dividends are lower A narrow listed society seeking completion principal enlargement for distributeholders An unlisted origin occupation where deserveings are established on dividend allowance (2 marks) Q6. The companies feel succeedingcitedcited reimbursement history: 2015 2016 2017 Tuna Co (Dividend) 400 410 421 Tuna Co (Earnings) 800 800 801 Sauna Co (Dividend) 20 80 10 Sauna Co (Earnings) 40 160 20 Mona Co (Dividend) 0 100 0 Mona Co (Earnings) 200 150 300 The dividend device for each society is? (HA) Tuna Co CONSTANT GROWTH CONSTANT PAY-OUT RESIDUAL Sauna Co CONSTANT GROWTH CONSTANT PAY-OUT RESIDUAL Mona Co CONSTANT GROWTH CONSTANT PAY-OUT RESIDUAL (2 marks) Q7. Juju Co. master has loving the succeedingcitedcited announcement at the annual unconcealed parley "In my childhood, I got a ascend in my half-yearly satisfaction from my father and I anticipateed it to hold in the advenient. The distributeholders anticipate the identical to feel a ascend in their dividends". Which of the succeedingcitedcited supports the announcement of the master? (MCQ) Dividend disconnection supposition Dividend dependency supposition Director is solicitous environing the society liquidity Director indicates a signaling pi on dividends (2 marks) Q8. Which of the succeedingcitedcited loving adown describe to Dividend affinity supposition maintenance in soul having an rude principal bargain? (MRQ) Taxes ancilla on dividends ; principal constructs are different Shareholders feel not notorious all notice current to the masters No affair absorb is ancilla Shareholders would feign a steady or extending dividend device (2 marks) Q9. Which of the succeedingcitedcited constituent feign the distributeholder in setting its dividend device? (MCQ) The topical laws ; regulations loving by the government The rereimbursement of new debit finance in 10 years The deflation pi The insist for customers products (2 marks) Q10. A scrip dividend is a: A dividend hired at a urban reprove on the visage compute of the distributes A dividend hired at a urban percentage reprove on the barconstruct compute of the distributes on the time that the dividend is announced A dividend reimbursement that converts in a frame of new distributes instead of principal A principal dividend that is mutable and is firm upon by the masters and accepted by the distributeholders (2 marks) Q11. Select divert liberty in kindred to scrip dividends. (HA) It can rescue the society's principal if a compute distribute libertys are enslaved up by the distributeholders ADVANTAGE DISADVANTAGE Scrip dividends may trigger a disclaiming signaling pi ADVANTAGE DISADVANTAGE (2 marks) Q12. Which of the succeedingcitedcited is a nauseousness of a distribute recbalance plot? (MCQ) Increase in deserveings per distribute Increase in gearing The possibility of a charmbalance is sunk Some distributeholders may support tax on principal construct succeedingcited the alienation of distributes (2 marks) DIVIDEND POLICY (ANSWERS) Q1. There are no tax choices (Assumption) Transaction absorb is secondary (Assumption) Directors transport all notice to distributeholders (Assumption) No inflation, M&M supposition does not avow anything environing the being or incorrectly of inflation Q2. All distributeholders lack their influence to acception TRUE As dividends are hired distribute worth acceptions FALSE All the distributeholders are solicitous environing their influence increment whether by principal constructs or by the dividend. The distribute worth curtails as dividends are hired owing if there conquer be no hold deserveings left by the society new equity conquer feel to be exorbitant resulting curtail in distribute worths. Q3. B Q4. D The residual supposition avows that if a society can authenticate dogmatical NPV projects it should endow in them. Solely when these endowment opportunities are unoccupied should dividends be hired Q5. C Residual allowance conquer not confer a accepted allowance & is geared to financing endowments that afford principal constructs. Q6. Tuna Co CONSTANT GROWTH Sauna Co CONSTANT PAY-OUT Mona Co RESIDUAL Tuna Co dividends extend at 10% per annum. Sauna Co pays a 50% of its deserveings as dividends Mona Co dividends are not conjoined behind a while deserveings so their device is residual Q7. D Q8. All others are chasten preserve for No affair absorb Taxes ancilla on dividends & principal constructs are different Shareholders feel not notorious all notice current to the masters No affair absorb is ancilla (Applicable solely if there is a mature principal bargain) Shareholders would feign a steady or extending dividend device Q9. A The topical laws & regulations loving by the government The rereimbursement of new debit finance in 10 years. The rereimbursement of anterior debit should be considered rather than the new debit finance. The deflation pi. The subsidy should be of inflation pi rather than deflation as deflation is a benefit The insist for customer products. Dividends are loving to distributeholders rather than to customers. Q10. C A dividend hired at a urban reprove on the visage compute of the distributes would most commsolely be a choice dividend. A principal dividend that is mutable and is firm by the masters and accepted by the distributeholders is a specification of a regularityal dividend. Q11. It can rescue the society's principal if a compute distribute libertys are enslaved up by the distributeholders ADVANTAGE Scrip dividends may trigger a disclaiming signaling pi DISADVANTAGE Q12. D Increase in deserveings per distribute, through a decrease in the compute of distributes in result.(Advantage) Increase in gearing, Recbalance of a society's own distributes allows debit to be substituted for equity, so promotion gearing. (Advantage) The possibility of a charmbalance sunk, Distribute recbalance command neutralize charm balance as this can strengthen the society to behind a whiledraw from the bargain. (Advantage)  Some distributeholders may support tax on principal construct succeedingcited the alienation of distributes (Disadvantage)