Which of the Following Statements Is CORRECT

question 17

Multiple Choice

Which of the following statements is CORRECT?

• A) Firms with a lot of good investment opportunities and a relatively small amount of cash tend to have above average payout ratios.
• B) One advantage of the residual dividend policy is that it leads to a stable dividend payout, which investors like.
• C) An increase in the stock price when a company cuts its dividend is consistent with signaling theory as postulated by MM.
• D) If the "clientele effect" is correct, then for a company whose earnings fluctuate, a policy of paying a constant percentage of net income will probably maximize the stock price.
• E) Stock repurchases make the most sense at times when a company believes its stock is undervalued.

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Definitions:

Quantity

The amount or number of a material or immaterial good that can be measured or quantified.

Quality

A measure of how good or suitable something is in comparison to similar items or services.

Seigniorage

Seigniorage is the profit made by a government by issuing currency, especially the difference between the face value of coins and their production costs.

Medium Of Exchange

An intermediary instrument, such as money, used to facilitate buying and selling goods and services.