Which of the Following Statements Is CORRECT

question 2

Multiple Choice

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 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 residual dividend model.
• D)Large stock repurchases financed by debt tend to increase earnings per share, but they also increase the firm's financial risk.
• E)A dollar paid out to repurchase stock is taxed at the same rate as a dollar paid out in dividends.Thus, both companies and investors are indifferent between distributing cash through dividends and stock repurchase programs.

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Definitions:

Joint Ventures

A business arrangement in which two or more parties agree to pool their resources for the purpose of accomplishing a specific task or business activity.

Learning Organization

An organization that facilitates the learning of its members and continuously transforms itself.

Rapidly

Occurring in a short time or at a fast pace, often with implications of haste or urgency.

More Effective

Being better than others in producing the desired result or achieving the intended purpose.