Question

1) Kelsey International declared a dividend on Friday, November 13, that is payable on Friday, December 11, to holders of record on Monday, November 30. What is the latest date that you can purchase this stock if you wish to receive this dividend? Assume there are no banking holidays within this period of time.

Tuesday, November 24

Wednesday, November 25

Thursday, November 26

Friday, November 27

Monday, November 30

2) Which one of the following would tend to favor a low-dividend payout?

Higher tax rates on capital gains than on dividend income

High flotation cost for equity issues

Endowment fund investors who cannot spend principal

Investors' desire for a high-dividend yield

Elimination of the tax deferral on capital gains

Answer 1

1.
Wednesday, November 25
Explanation
Inorder to eligible for dividend we have to purchase the shares 3 days before the record date.
Given record date was on Monday, November 30, The dates 29 and 28 are holidays and not included in 3 days before the record date. So, 3 days before the record date here arrives on Wednesday, November 25. It is the latest date that you can purchase this stock if you wish to receive this dividend.

2.
High flotation cost for equity issues
Explanation:
Higher the floation cost for equity issues then lower the payment of dividend. So dividend payout is less