Which of the Following Statements Is CORRECT

question 17

Multiple Choice

Which of the following statements is CORRECT?

• A) The tax code encourages companies to pay dividends rather than retain earnings.
• B) If a company uses the residual dividend model to determine its dividend payments, dividends payout will tend to increase whenever its profitable investment opportunities increase.
• C) The stronger management thinks the clientele effect is, the more likely the firm is to adopt a strict version of the residual dividend model.
• D) Large stock repurchases financed by debt tend to increase earnings per share, but they also increase the firm’s financial risk.
• E) A dollar paid out to repurchase stock is taxed at the same rate as a dollar paid out in dividends. Thus, both companies and investors are indifferent between distributing cash through dividends and stock repurchase programs.

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Definitions:

Discriminative Stimulus

A specific stimulus in the presence of which a particular response is more likely to be reinforced.

Trick or Treating

A Halloween custom for children who dress in costume and solicit candy or other treats door-to-door with the question, "Trick or treat?"

Neighbours

Individuals living near one another, typically in the same street or community.

Operant Response

A behavior that is strengthened or weakened by the consequences that follow it, as described in operant conditioning.