Author Question: Mega Corp. just raised its quarterly dividend from $0.45 per share to $0.475. On the day of the ... (Read 23 times)

vHAUNG6011 · **on:** Apr 25, 2021

Question 1

Lazy Lightning Power Corp. manufactures, distributes, and services automotive parts and engines worldwide. Lazy's income statement for the year just ending is shown below. What was Lazy Lightning's dividend payout rate?

◦ 12.79%
◦ 13.07%
◦ 14.80%
◦ 17.50%
◦ 19.55%

Question 2

Mega Corp. just raised its quarterly dividend from $0.45 per share to $0.475. On the day of the announcement, the company's stock price rose by $2 from $50 to $52. Which of the following is NOT a good reason for the stock price increase?
◦ Mega's recent earnings had been increasing and the market inferred from the dividend that the earnings increases would not be reversed.
◦ The CEO of Mega is a big spender and the market inferred that the dividend increase would reduce his wasteful spending by reducing free cash flow.
◦ The market inferred that Mega's future sustainable earnings would be higher than it previously thought.
◦ The higher dividends increased the dividend tax shields.

okolip · **Reply #1 on:** Apr 25, 2021

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