AFB Corp Declared a 1.00 dividend on January 5th, with an ex-dividend date of January 19th, a
record date of January 21st, and a payment date of March 15th. Doug purchased AFB stock on
January 6th.
Which of the following statements is MOST correct?
A) Doug will not receive the dividend because he purchased the stock after the declaration date.
B) Doug will receive the dividend if he still sells his stock on January 20th because he owned the
stock on the ex-dividend date.
C) Doug will receive the dividend if he still owns the stock on January 21st, even if he sells the
stock before the payment date.
D) Doug will not receive the dividend because he purchased the stock prior to the record date.
Question 2
Which of the following statements is MOST correct concerning a corporation's optimal capital
structure?
A) The optimal capital structure minimizes the present value of financial distress costs and
agency costs.
B) The optimal capital structure occurs where the present value of the interest tax shield equals
the present value of the firm's bankruptcy costs.
C) The optimal capital structure maximizes the present value of the interest tax shield.
D) The optimal capital structure occurs at the point where the market value of the levered firm is
maximized.
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