Questions and Problems


(Questions 1-13)

1. Dividends and Taxes Caputo, Inc., has declared a $5.00 per share dividend. Suppose capital gains are not taxed, but dividends are taxed at 34 percent. New IRS regulations require that taxes be withheld at the time the dividend is paid. Caputo sells for $80 per share, and the stock is about to go ex dividend. What do you think the ex-dividend price will be?

2. Stock Dividends The owners' equity accounts for Octagon International are shown here:

Ross et al.: Fundamentals of Corporate Finance, Sixth Edition, Alternate Edition

VI. Cost of Capital and Long-Term Financial Policy

18. Dividends and Dividend Policy

© The McGraw-Hill Companies, 2002

CHAPTER 18 Dividends and Dividend Policy

Common stock ($1 par value)

$ 10,000

Capital surplus


Retained earnings


Total owners' equity


Market Value Balance Sheet


$ 15,000



Fixed assets


0 0

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