Which of the Following Statements Is CORRECT

question 45

Multiple Choice

Which of the following statements is CORRECT?

• A) If a firm repurchases some of its stock in the open market,then shareholders who sell their stock for more than they paid for it will be subject to capital gains taxes.
• B) An open-market dividend reinvestment plan will be most attractive to companies that need new equity and would otherwise have to issue additional shares of common stock through investment bankers.
• C) Stock repurchases tend to reduce financial leverage.
• D) If a company declares a 2-for-1 stock split,its stock price should roughly double.
• E) One advantage of adopting the residual dividend model is that this makes it easier for corporations to meet the requirements of Modigliani and Miller's dividend clientele theory.

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Definitions:

Promotional Strategy

The plan devised by a company to increase awareness of its products or services, encourage sales, and improve market position.

Pricing Strategy

An approach businesses use to set the prices for their products or services based on market conditions, production costs, competitor prices, and company objectives.

Distribution Strategy

The plan a business uses to make its products or services available to customers, including channels, coverage, and logistics.

Product Strategy

An action plan for managing a product throughout its lifecycle, focusing on introducing, growing, and maintaining market share.