Exam 3 Solutions - Fall 2002 Final Exam 1 Which of the...

Info icon This preview shows pages 1–2. Sign up to view the full content.

View Full Document Right Arrow Icon
Fall 2002 Final Exam 1. Which of the following statements is incorrect (least correct)? A. Theoretically, the price of a share of stock will decline by the present value of the dividend given up when the stock goes ex dividend . B. If a share of stock is growing at a constant rate, then the growth rate of dividends should be equal to the growth rate of price (capital appreciation). In addition, if the stock price is in a state of equilibrium, then this growth rate should also be equal to the investors’ required rate of return minus the expected dividend yield. * C. The price sensitivity of a share of common stock increases with the time remaining until it matures. D. The preemptive right is important because it protects existing shareholders against dilution of their ownership interests. E. To evaluate theoretical changes in dividend policy we assume that capital budgeting (investing) and capital structure (financing) decisions have already been made. Thus, increasing a dividend is accomplished by issuing new equity and decreasing a dividend is accomplished by repurchasing existing equity. 2. Which of the following statements is correct (most correct)? * 3. Which of the following statements is incorrect (least correct)? *
Image of page 1

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full Document Right Arrow Icon
Image of page 2
This is the end of the preview. Sign up to access the rest of the document.

{[ snackBarMessage ]}

What students are saying

  • Left Quote Icon

    As a current student on this bumpy collegiate pathway, I stumbled upon Course Hero, where I can find study resources for nearly all my courses, get online help from tutors 24/7, and even share my old projects, papers, and lecture notes with other students.

    Student Picture

    Kiran Temple University Fox School of Business ‘17, Course Hero Intern

  • Left Quote Icon

    I cannot even describe how much Course Hero helped me this summer. It’s truly become something I can always rely on and help me. In the end, I was not only able to survive summer classes, but I was able to thrive thanks to Course Hero.

    Student Picture

    Dana University of Pennsylvania ‘17, Course Hero Intern

  • Left Quote Icon

    The ability to access any university’s resources through Course Hero proved invaluable in my case. I was behind on Tulane coursework and actually used UCLA’s materials to help me move forward and get everything together on time.

    Student Picture

    Jill Tulane University ‘16, Course Hero Intern