Which of the Following Statements Is CORRECT

question 14

Multiple Choice

Which of the following statements is CORRECT?

• A) If a firm repurchases some of its stock in the open market, then shareholders who sell their stock for more than they paid for it will be subject to capital gains taxes.
• B) An open-market dividend reinvestment plan will be most attractive to companies that need new equity and would otherwise have to issue additional shares of common stock through investment bankers.
• C) Stock repurchases tend to reduce financial leverage.
• D) If a company declares a 2-for-1 stock split, its stock price should roughly double.
• E) One advantage of adopting the residual dividend policy is that this makes it easier for corporations to meet the requirements of Modigliani and Miller's dividend clientele theory.