Which of the Following Statements Is NOT Correct

question 3

Multiple Choice

Which of the following statements is NOT correct?

• A) After a 3-for-1 stock split, a company's price per share should fall, but the number of shares outstanding will rise.
• B) Investors can interpret a stock repurchase program as a signal that the firm's managers believe the stock is undervalued.
• C) Companies can repurchase shares to distribute large inflows of cash, say from the sale of a division, to stockholders without paying cash dividends.
• D) Stockholders pay no income tax on dividends if the dividends are used to purchase stock through a dividend reinvestment plan.
• E) Stock repurchases can be used by a firm as part of a plan to change its capital structure.

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Definitions:

Market Value

The present cost at which a service or asset is available for purchase or sale in the market.

Bond Exchange

The process of trading bonds in the financial markets or swapping one bond for another to achieve better investment goals.

Carrying Cost

The total cost associated with holding inventory, including storage, insurance, taxes, depreciation, and opportunity costs, among others.

Setup Cost

The expenses incurred in preparing equipment or processes for manufacturing an order or batch of products.