Which of the Following Statements Is Most Correct

question 13

Multiple Choice

Which of the following statements is most correct?

• A) In general, stock repurchases are taxed the same way as dividends.
• B) One nice feature of dividend reinvestment plans is that they enable investors to reduce the taxes paid on their dividends.
• C) On average, companies send a negative signal to the marketplace when they announce an increase in their dividend.
• D) If a company is interested in issuing new equity capital, a new stock dividend reinvestment plan probably makes more sense than an open market dividend reinvestment plan.
• E) Statements b and d are correct.

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Definitions:

Company's Rate

The rate at which a company borrows or lends money, often specific to its cost of capital or interest rates.

Required Rate

The minimum rate of return on an investment that investors demand, taking into account the investment’s risk level compared to the risk-free rate of return.

Annual Cash Flows

The total amount of money being transferred into and out of a business, captured on a yearly basis, and used to assess the financial health of the entity.

IRR Cross-Over Rate

The rate of return at which two different investments have the same net present value; used in comparing project alternatives.