Which of the following statements is NOT correct? A) stockholders pay no income tax on dividends...
Which of the following statements is NOT correct?
A) stockholders pay no income tax on dividends if the dividends are used to purchase stock through a dividend reinvestment plan
B) Companies can repurchase shares to distribute large inflows of cash, say from the sale of a division, to stockholders without paying cash dividends
C) investors can interpret a stock repurchase program as a signal that the firm's managers believe the stock is undervalued
D) After a 3-for-1 stock split, a company's price per share should fall, but the number of shares outstanding will rise
Homework Answers
Option A.
Stockholders will have to pay income tax on dividends even if the dividends are used to purchase stock through a dividend reinvestment plan.
Add Answer to:
Which of the following statements is NOT correct?
A) stockholders pay no income tax on dividends...
Which of the following statements is NOT CORRECT? Stock repurchases can be used by a firm...
Which of the following statements is NOT CORRECT? Stock repurchases can be used by a firm as part of a plan to change its capital structure. After a 3-for-1 stock split, a company's price per share should fall, but the number of shares outstanding will rise. Investors may interpret a stock repurchase program as a signal that the firm's managers believe the stock is undervalued, or, alternatively, as a signal that the firm does not have many good investment opportunities....
Which of the following statements is correct? a. Empirical research indicates that, in general, companies send...
Which of the following statements is correct? a. Empirical research indicates that, in general, companies send a negative signal to the marketplace when they announce an increase in the dividend, and as a result share prices fall when dividend increases are announced. The reason is that investors interpret the increase as a signal that the firm has relatively few good investment opportunities. b. If a company wants to raise new equity capital rather steadily over time, a new stock dividend...
6 Which of the following statements is correct? a. The tax code encourages companies to pay...
6 Which of the following statements is correct? a. The tax code encourages companies to pay dividends rather than retain earnings. . b. If a company uses the residual dividend model to determine its dividend payments, dividends payout will tend b. to increase whenever its profitable investment opportunities increase . c. The stronger management thinks the clientele effect is, the more likely the firm is to adopt a strict version of the c. residual dividend model. d Large stock repurchases...
Which of the following statements is correct? a. The tax code encourages companies to pay dividends...
Which of the following statements is correct? a. The tax code encourages companies to pay dividends rather than reinvest earnings. b. Companies may pay too high a price in a large open market repurchase if it takes too long to complete. c. An investor's capital gains from selling stock in a repurchase are always taxed at a higher rate than if the distribution were dividends. d. The stronger management thinks the clientele effect is, the more likely the firm is...
20. Which of the following Statements is correct? a. If a company uses the residual dividend...
20. Which of the following Statements is correct? a. If a company uses the residual dividend model to determine its dividend payments, dividends payout will tend to increase whenever its profitable investment opportunities increase. b. Large stock repurchases financed by debt tend to increase earnings per share, but they also increase the firm's financial risk. c. The tax code encourages companies to pay dividends rather than retain earnings. d. The stronger management thinks the clientele effect is, the more likely...
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