Which of the Following Statements Is CORRECT

question 17

Multiple Choice

Which of the following statements is CORRECT?

• A) If a company uses the residual dividend model to determine its dividend payments, dividends payout will tend to increase whenever its profitable investment opportunities increase.
• B) The stronger management thinks the clientele effect is, the more likely the firm is to adopt a strict version of the residual dividend model.
• C) Large stock repurchases financed by debt tend to increase earnings per share, but they also increase the firm's financial risk.
• D) A dollar paid out to repurchase stock is taxed at the same rate as a dollar paid out in dividends. Thus, both companies and investors are indifferent between distributing cash through dividends and stock repurchase programs.
• E) The tax code encourages companies to pay dividends rather than retain earnings.

---

Definitions:

Fungal Infection

An infectious condition caused by fungi invading the skin, nails, or other parts of the body, leading to various symptoms.

Closed Head Injury

A type of traumatic brain injury where the skull is not penetrated or fractured.

Cool Water

Water at a refreshing and slightly chilled temperature, often used for drinking or bathing to cool down.

Short Intervals

Brief periods of time between events or actions.