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 in a share repurchase are taxed less favorably than dividends; this explains 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:

Infant Nursery

A room in a house or facility specially designed and equipped for the care and accommodation of infants.

Egocentrism

The cognitive inability to understand or assume any perspective other than one's own, commonly observed in children during the preoperational stage of development.

Infantile Amnesia

The common inability of adults to remember the earliest years of their childhood, typically from birth until around 4 years of age.

Stranger Anxiety

Describes a developmental stage in infants and young children where they experience fear or distress around unfamiliar people.