Which of the Following Is NOT Correct in Comparing a Share

question 69

Multiple Choice

Which of the following is NOT correct in comparing a share repurchase to a cash dividend in a world with no taxes, transaction costs, or other market imperfections?

• A) The price of the firm's stock will be the same after the share repurchase or the cash dividend.
• B) The firm's EPS will be higher after the repurchase than it will be after the dividend.
• C) The firm's price/earnings ratio will be the same after the share repurchase or the cash dividend.
• D) The firm will have fewer shares of stock outstanding after the repurchase than it will after the dividend.
• E) The total wealth of an individual shareholder will not be affected by the share repurchase or the cash dividend.

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Definitions:

P(X = x, Y = y)

The joint probability of two discrete random variables X and Y taking on specific values x and y, respectively.

Uniform Distribution

A type of probability distribution where all outcomes are equally likely to occur within a defined range.

Density Function

A mathematical function that describes the probability distribution of a continuous random variable, showing the likelihood of different outcomes.

Area

Refers to the extent of a two-dimensional surface within a boundary, measured in square units.