Which of the Following Statements Is Correct

question 29

Multiple Choice

Which of the following statements is correct?

• A) One disadvantage of dividend reinvestment plans is that they increase transactions costs for investors who want to increase their ownership in the company.
• B) One advantage of dividend reinvestment plans is that they enable investors to postpone paying taxes on the dividends credited to their account.
• C) Stock repurchases can be used by a firm that wants to increase its debt ratio.
• D) One advantage of an open market dividend reinvestment plan is that it provides new equity capital and increases the shares outstanding.

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Definitions:

Elastic Demand

A market scenario where the quantity demanded of a product or service significantly changes in response to a change in price.

Fast-Food

Quick service restaurants serving food that is prepared and served rapidly.

Consumer Surplus

The benefit obtained by consumers because they are able to purchase a product for a price that is less than the highest price that they would be willing to pay.

Optimal Consumption

refers to the situation in which a consumer allocates their income in a way that maximizes their overall satisfaction or utility, given their preferences and the prices of goods and services.