Which of the Following Statements Is FALSE

question 21

Multiple Choice

Which of the following statements is FALSE?

• A)When a firm pays a dividend,shareholders are taxed according to the dividend tax rate.If the firm repurchases shares instead,and shareholders sell shares to create a homemade dividend,the homemade dividend will be taxed according to the capital gains tax rate.
• B)When the tax rate on dividends exceeds the tax rate on capital gains,shareholders will pay lower taxes if a firm uses share repurchases for all payouts rather than dividends.
• C)Firms that use dividends will have to pay a lower pre-tax return to offer their investors the same after-tax return as firms that use share repurchases.
• D)The optimal dividend policy when the dividend tax rate exceeds the capital gain tax rate is to pay no dividends at all.

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Definitions:

Ice Age

A period of long-term reduction in the temperature of Earth's surface and atmosphere, resulting in the presence or expansion of continental and polar ice sheets and alpine glaciers.

Derived Trait

A trait that is present in an organism but was absent in the last common ancestor of the group, indicating an evolutionary change.

Clade

A group of organisms that includes a single ancestor and all its descendants, representing a branch on the tree of life.

Sexual Dimorphism

The condition where the two sexes of the same species exhibit different characteristics beyond the differences in their sexual organs.