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:

Child Molesters

Refers to individuals who sexually abuse children under the age of consent.

Sexual Thoughts

Cognitive processes or mental reflections focused on sexual desire, activity, or attraction.

Lie Detector

A machine or procedure that attempts to determine whether a person is telling the truth by measuring physiological responses, such as blood pressure, pulse, and respiration.

Planned Behavior

A theory that predicts an individual's intention to engage in a behavior at a specific time and place.