Which of the Following Statements Is INCORRECT

question 51

Multiple Choice

Which of the following statements is INCORRECT?

• A) Stock repurchases can be used by a firm as part of a plan to change its capital structure.
• B) After a 3-for-1 stock split, a company's price per share should fall, but the number of shares outstanding will rise.
• C) Investors can interpret a stock repurchase program as a signal that the firm's managers believe the stock is undervalued.
• D) Stockholders pay no income tax on dividends if the dividends are used to purchase stock through a dividend reinvestment plan.

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Definitions:

Consistency

The quality of being predictable, reliable, and steady over time.

Discounting Principle

A concept in psychology which suggests that when there are multiple causes for a behavior, the importance or contribution of any single cause is reduced.

Potential Cause

An element or factor that might bring about a certain effect or outcome, not yet proven as the definitive cause.

Covariation Principle

A concept in social psychology indicating that behavior is attributed to potential causes that co-occur consistently with the observed effect.