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.

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Definitions:

Critical Ratio

A scheduling or prioritization technique that calculates the ratio of the time remaining until a task's due date to the time required to complete the task, used to order tasks by urgency.

Due Date

The specified date by which a task, project, or payment is required to be completed or submitted.

Priority Rule

A guideline or criterion used to determine the sequence in which tasks or operations will be carried out in a process or system.

Johnson's Rule

A scheduling rule aimed at minimizing job setup or processing time and the total time to complete a group of jobs on two machines.