Dividend Policy and Company Value: You Own 7,000 Shares of Irri-Gate

question 2

Multiple Choice

Dividend policy and company value: You own 7,000 shares of Irri-gate Co. The company has decided to pay a special dividend of $1.00 per share. Dividend payments are taxed at 15 per cent. You intend to reinvest your dividend back into the company, but the company does not have a dividend reinvestment program. To reinvest through your broker, you will have to pay a $46 commission. If the company's shares are trading at $12.43 following the dividend payment, how many additional shares will you be able to purchase?

• A) 563 shares
• B) 481 shares
• C) 478 shares
• D) 475 shares

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Definitions:

Donor Restrictions

Conditions placed by donors on the use or timing of use of donated assets, requiring organizations to use the assets as specified.

Depreciation Expense

A measure of the cost allocated for the reduction in value of a tangible fixed asset over its useful life.

Health Care Entities

Organizations that provide medical services, manufacture medical equipment or drugs, provide medical insurance, or otherwise facilitate the provision of healthcare to patients.

Unconditional Promises

Commitments or guarantees made without any conditions attached, often used in the context of financial agreements or contracts.