Which of the Following Statements Is Correct

question 23

Multiple Choice

Which of the following statements is correct?

• A) One advantage of the residual dividend policy is that it leads to a stable dividend payout, which investors like.
• B) An increase in the stock price when a company decreases its dividend is consistent with signaling theory as postulated by MM.
• C) 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.
• D) Stock repurchases make the most sense at times when a company believes its stock is undervalued.
• E) Firms with a lot of good investment opportunities and a relatively small amount of cash tend to have above average payout ratios.

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Definitions:

Fear of Punishment

The apprehension or anxiety experienced over the prospect of receiving a penalty for an action or behavior.

Inefficient Means

Methods or processes that do not achieve their intended outcome in the most effective, timely, or resource-conserving manner.

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Individuals or entities that possess and exercise control over others as property, typically within contexts where slavery is legally or socially sanctioned.

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The process by which individuals influence which emotions they have, when they have them, and how they experience and express these emotions.