Multiple Choice Identify the choice that best completes the statement or answers the question 16. Which of the following would be most likely to lead to a decrease in a firnits dividend payout ratio? Its research and development efforts pay off, and it now has more high-return investment a. opportunities. b. Its access to the capital markets increases c. Its stock price has increased over the last year by a greater percentage than the increase in the broad stock market averages. d. Its accounts receivable decrease due to a change in its credit policy Suppose Tapley Inc. uses a WACC of 8% for below average risk projects, 10% for average-risk projects, and 17. 12% f assuming that the company uses the NPV method when choosing projects? a. Without information about the projects'NPVs we cannot determine which one or ones or above-average risk projects. Which of the following independent projects should Tapley accept, should be accepted. b. Project C, which has above-average risk and an IRR 11%. c. Project A, which has average risk and an IRR-996. d. Project B, which has below-average risk and an IRR 8.5%. e. All of these projects should be accepted as they will produce a positive NPV. Which of the following statements is CORRECT? a. 18. Historically, the tax code has encouraged companies to pay dividends rather than retain earnings b. If a company uses the residual dividend model to determine its dividend payments dividend payout will tend to increase whenever its profitable investment opportunities increase relatively rapidly. Large stock repurchases financed by debt tend to increase expected earnings per share, but they also tend to increase the firm's financial risk. The more a firm's management believes in the clientele effect, the more likely the firm is to adhere strictly to the residual dividend model. c. d. 19. Which of the following statements is CORRECT? If the "clientele effect" is correct, then for a company whose earnings fluctuate, a policy of paying a constant percentage of net income will probably maximize its stock price. a. n increase in the stock price when a company cuts its dividend is consistent with signaling theory as postulated by MM One advantage of the residual dividend model is that it leads to a stable dividend payout, which investors like. Stock repurchases make the most sense at times when a company believes its stock is undervalued c. d