The Most Important Difference Between Stock Repurchases and Cash Dividends

question 46

Multiple Choice

The most important difference between stock repurchases and cash dividends is that they:
I. Benefit different groups
II. Have different effects on corporate cash flow
III. May have different tax consequences

• A) I only
• B) II only
• C) III only
• D) I, II, and III

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Definitions:

Consumer Equilibrium

A state in which a consumer has allocated their income in a way that maximizes their total utility, given the prices of goods and services.

Total Utility

The total satisfaction received from consuming a particular quantity of goods and services.

Indifference Curve

A graph representing combinations of two goods or services among which a consumer is indifferent, showing preference levels.

Optimal Consumption

The mix of goods and services that maximizes consumer utility or satisfaction given their budget constraints.