Which of the Following Statements Is CORRECT

question 8

Multiple Choice

Which of the following statements is CORRECT?

• A) If a company has a 2-for-1 stock split, its stock price should roughly double.
• B) Capital gains earned on shares repurchased are taxed less favorably than dividends, which is why companies typically pay dividends and avoid share repurchases.
• C) often, a company's stock price will rise when it announces that it plans to commence a share repurchase program. Such an announcement could lead to a stock price decline, but this does not normally happen.
• D) Stock repurchases increase the number of outstanding shares.
• E) The clientele effect is the best explanation for why companies tend to vary their dividend payments from quarter to quarter. Answer: c is correct, but perhaps the easiest way to answer this question is to eliminate the other choices, which are obviously wrong.

---

Definitions:

Erectile Structure

A body part capable of becoming erect or rigid through the engorgement of blood vessels, often used in reference to parts of the reproductive system.

Glans Penis

The sensitive bulbous structure at the distal end of the penis.

Vulva

The external part of the female genital organs, including the labia majora, labia minora, clitoris, and the openings of the vagina and the urethra.

Labia Majora

The outer folds of skin framing the vulva, which contain sweat and oil-secreting glands, providing protection to the female genitalia.