Which of the Following Statements Is CORRECT

question 28

Multiple Choice

Which of the following statements is CORRECT?

• A) If a firm follows the residual dividend model,then a sudden increase in the number of profitable projects would be likely to lead to a reduction of the firm's dividend payout ratio.
• B) The clientele effect explains why so many firms change their dividend policies so often.
• C) One advantage of adopting the residual dividend model is that this policy makes it easier for a corporation to attract a specific and well-identified dividend clientele.
• D) New-stock dividend reinvestment plans are similar to stock dividends because they both increase the number of shares outstanding but don't change the firm's total amount of book equity.
• E) Investors who receive stock dividends must pay taxes on the value of the new shares in the year the stock dividends are received.

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Definitions:

Square Inches

A unit of area measurement equal to the area of a square with sides each one inch long.

Factoring

The mathematical process of breaking down an expression into a product of its simpler factors or components.

Equation

A mathematical statement that asserts the equality of two expressions, usually denoted by the symbol "=".

X-Intercepts

Points where a graph intersects the x-axis.