Which of the Following Statements Is CORRECT

question 59

Multiple Choice

Which of the following statements is CORRECT?

• A) Historically,the tax code has encouraged companies to pay dividends rather than retain earnings.
• B) If a company uses the residual dividend model to determine its dividend payments,dividend payout will tend to increase whenever its profitable investment opportunities increase relatively rapidly.
• C) The more a firm's management believes in the clientele effect,the more likely the firm is to adhere strictly to the residual dividend model.
• D) Large stock repurchases financed by debt tend to increase expected earnings per share,but they also tend to increase the firm's financial risk.
• E) A dollar paid out to repurchase stock has the same tax benefit as a dollar paid out in dividends.Thus,both companies and investors should be indifferent between distributing cash through dividends and stock repurchase programs.

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Definitions:

World Religion

A religious belief system that has a large number of followers and is widely practiced around the world, including Christianity, Islam, Buddhism, Hinduism, and Judaism.

Most Widespread

Refers to something that is spread or distributed over a large area or among a large number of people, indicating extensive prevalence or common occurrence.

Christianity

A monotheistic religion based on the life and teachings of Jesus Christ, emphasizing love, redemption, and the belief in an afterlife.

Protestant Ethic

A concept in sociology introduced by Max Weber to describe the Calvinist belief in the moral value of hard work and its contribution to a person's success and salvation.