Which of the Following Statements Is CORRECT

question 26

Multiple Choice

Which of the following statements is CORRECT?

• A) If a company has a 2-for-1 stock split,its stock price should roughly double.
• B) Capital gains earned on shares repurchased are taxed less favorably than dividends,which is why companies typically pay dividends and avoid share repurchases.
• C) Very often,a company's stock price will rise when it announces that it plans to commence a share repurchase program.Such an announcement could lead to a stock price decline,but this does not normally happen.
• D) Stock repurchases increase the number of outstanding shares.
• E) The clientele effect is the best explanation for why companies tend to vary their dividend payments from quarter to quarter.

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Definitions:

Psychogenic

Originating in the mind or in mental or emotional processes; having a psychological rather than a physiological cause.

Head Injury

Physical trauma to the head, which can lead to various levels of brain injury, ranging from mild concussions to severe brain damage.

Emotional Shock

A psychological condition arising in response to a terrifying or traumatic event, causing a strong emotional impact.

Decay Theory

A theory suggesting that memory fades due to the mere passage of time unless it is actively rehearsed.