Which of the Following Statements Is CORRECT

question 30

Multiple Choice

Which of the following statements is CORRECT?

• A)One disadvantage of dividend reinvestment plans is that they increase transactions costs for investors who want to increase their ownership in the company.
• B)One advantage of dividend reinvestment plans is that they enable investors to postpone paying taxes on the dividends credited to their account.
• C)Stock repurchases can be used by a firm that wants to increase its debt ratio.
• D)Stock repurchases make sense if a company expects to have a lot of profitable new projects to fund over the next few years, provided investors are aware of these investment opportunities.
• E)One advantage of an open market dividend reinvestment plan is that it provides new equity capital and increases the shares outstanding.

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Definitions:

Favorite Bundle

The combination of goods and services that maximizes a consumer's utility given their budget constraint.

Indifference Curve

An indifference curve represents a combination of two goods between which a consumer is indifferent, showing equal utility or satisfaction levels.

Absolute Values

A number's distance from zero on the number line, disregarding its direction; always a non-negative value.

Favorite Bundle

The combination of goods or services that maximizes an individual's utility given their budget constraints.