Earmark, Co

question 69

Multiple Choice

Earmark, Co. has a policy of returning a minimum of 40 percent of earnings to shareholders every year through dividend issues and open-market stock repurchases. In each quarter this year, the company earned $0.35 per share. In each of the first three quarters the company paid a regular cash dividend of $0.10 per share. What combination of dividends could the company's board approve to meet their target payout percentage?

• A) A regular cash dividend of $0.10 per share.
• B) A regular cash dividend of $0.10 per share and an extra dividend of 0.56 per share.
• C) A regular cash dividend of $0.10 per share and an extra dividend of $0.46 per share.
• D) A regular cash dividend of $0.10 per share and an extra dividend of $0.16 per share.

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Definitions:

Risk-Free Rate

The theoretical return of an investment with zero risk, often represented by the yield on government securities like U.S. Treasury bonds.

Beta

A metric for assessing the uncertainty, or inherent danger, of an individual security or collective investment compared to the market at large.

Common Stock

Represents equity ownership in a corporation, giving holders voting rights and a share in the company's profits via dividends.

Risk-Free Rate

The hypothesized return rate of a risk-less investment, often exemplified by the yield found in government securities.