Which of the Following Statements Is Most Correct

question 16

Multiple Choice

Which of the following statements is most correct?

• A) Companies can repurchase shares either (1) to change their capital structures or (2) to distribute cash to stockholders without paying cash dividends. In the second situation, tax considerations will probably play a key role in the decision to repurchase stock versus to pay more cash dividends.
• B) Stock dividends provide investors with additional shares of stock, not cash, yet many investors must pay cash in the form of taxes on the value of the stock dividends. For this reason, stock dividends are rarely used today.
• C) The bird-in-the-hand theory of dividend policy could be rejected immediately if personal income taxes were abolished.
• D) If the curve relating the WACC and the debt ratio looks like a sharp 'V', this would make it more feasible for a firm to follow the residual dividend policy than if the curve looks like a shallow bowl (or a shallow 'U').
• E) The open market type of dividend reinvestment plan is the best type for firms that need to bring in new equity capital.

---

Definitions:

Physiology

The branch of biology that deals with the normal functions of living organisms and their parts, including the physical and chemical processes involved.

Levels of Organization

A hierarchical structure for organizing complexity in biology, ranging from atoms to molecules, cells, tissues, organs, organ systems, organisms, populations, communities, ecosystems, and the biosphere.

Midsagittal

Relating to the median plane or a section that divides the body into equal left and right halves.

Serous Membrane

A thin membrane lining certain internal cavities of the body, secreting serous fluid to lubricate the surfaces.