hitechpathshala

Q. 1

Which one of the following is the assumption of Gordon’s Model?

Ke > g

Retention ratio, (b), once decide upon, is constant

Firm is an all equity firm

All of the above

Q. 2

What should be the optimum Dividend pay-out ratio, when r = 15% & Ke = 12%:

100%

50%

Zero

None of the above.

Q. 3

Which of the following is the irrelevance theory?

Walter model

Gordon model

M.M. hypothesis

Linter’s model

Q. 4

If the company’s D/P ratio is 60% & ROI is 16%, what should be the growth rate?

5%

7%

6.4%

9.6%

Q. 5

If the shareholders prefer regular income, how does this affect the dividend decision:

It will lead to payment of dividend

It is the indicator to retain more earnings

It has no impact on dividend decision

Can’t say

Q. 6

Mature companies having few investment opportunities will show high payout ratios, this statement is:

False

True

Partial true

None of these

Q. 7

Which of the following is the limitation of Linter’s model?

This model does not offer a market price for the shares.

The adjustment factor is an arbitrary number and not based on anyscientific criterion or methods.

Both (a) & (b)

None of the above.

Q. 8

What are the different options other than cash used for distributing profits toshareholders?

Bonus shares

Stock split

Both (a) and (b)

None of the above

Q. 9

Which of the following statement is correct with respect to Gordon’s model?

When IRR is greater than cost of capital, the price per share increases anddividend pay-out decreases.

When IRR is greater than cost of capital, the price per share decreases anddividend pay-out increases.

When IRR is equal to cost of capital, the price per share increases anddividend pay-out decreases.

When IRR is lower than cost of capital, the price per share increases anddividend pay-out decreases

Q. 10

Which among the following is not an assumption of Walter’s Model?

Rate of return and cost of capital are constant

Information is freely available to all

There is discrimination in taxes

The firm has perpetual life

FMSM - 8 DIVIDEND DECISIONS

Marks: 10