Which of the Following Statements Is Correct

question 45

Multiple Choice

Which of the following statements is correct?

• A)If a firm repurchases some of its stock in the open market, then shareholders who sell their stock for more than they paid for it will be subject to capital gains taxes.
• B)An open-market dividend reinvestment plan will be most attractive to companies that need new equity and would otherwise have to issue additional shares of common stock through investment bankers.
• C)Stock repurchases tend to reduce financial leverage.
• D)If a company declares a 2-for-1 stock split, its stock price should roughly double.

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Definitions:

Reasonable Amount

An amount that is considered fair, appropriate, and not excessive under the circumstances, often used in legal and financial contexts.

Gratuitous Promise

A pledge or commitment made without the expectation of receiving something in return, not typically enforceable as a contract.

Statute Law

Written laws passed by a legislative body at the federal or state level, as opposed to common law, which is derived from judicial decisions.

Early Payment

The act of settling a debt or invoice before its designated due date, which may sometimes lead to benefits such as discounts.