Which of the Following Is NOT Correct in Comparing a Share

question 55

Multiple Choice

Which of the following is NOT correct in comparing a share repurchase to a cash dividend in a world with no taxes, transaction costs, or other market imperfections?

• A) The price of the firm's stock will be the same after the share repurchase or the cash dividend.
• B) The firm's EPS will be higher after the repurchase than it will be after the dividend.
• C) The firm's price/earnings ratio will be the same after the share repurchase or the cash dividend.
• D) The firm will have fewer shares of stock outstanding after the repurchase than it will after the dividend.
• E) The total wealth of an individual shareholder will not be affected by the share repurchase or the cash dividend.

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Definitions:

Process Consultants

Professionals who assist organizations or groups in understanding and improving their internal processes, especially concerning decision-making and problem-solving.

Final-Offer Arbitration

A dispute resolution process where each party presents their best offer, and an arbitrator chooses one of the offers with no alterations as the resolution.

Cooling-Off Effect

A period designed to allow parties in a dispute to calm emotions and reconsider their positions.

Arbitration

A method of dispute resolution involving a neutral third party who makes a binding decision.