Which of the Following Statements Is CORRECT

question 14

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 policy 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:

Equal Credit Opportunity Act

A U.S. federal law that prohibits discrimination by lenders against credit applicants on the basis of race, color, religion, national origin, sex, marital status, age, or because they receive public assistance.

Credit Decisions

The process by which lenders determine the creditworthiness of potential borrowers and decide whether to extend credit.

Deceptive Advertising

A marketing practice that misleads or misinforms consumers about a product or service through false claims or omission of crucial information.

Shipping Cost

The expense incurred to transport goods from one location to another, often factored into the price of online purchases.