Which of the Following Statements Is Correct

question 55

Multiple Choice

Which of the following statements is correct?

• A)One feature of dividend reinvestment plans (DRIPs) is that they reduce the taxes investors would have to pay if they received cash dividends.
• B)Empirical research indicates that, in general, companies send a negative signal to the marketplace when they announce an increase in the dividend, and as a result, share prices fall when dividend increases are announced. The reason for this is that investors interpret the increase as a signal that the firm has relatively few good investment opportunities.
• C)If a company wants to raise new equity capital steadily over time, a new stock dividend reinvestment plan would make sense. However, if the firm does not want or need new equity, then an open market purchase dividend reinvestment plan would probably make more sense.
• D)Dividend reinvestment plans have not caught on in most industries, and today about 99% of all companies with DRIPs are utilities.

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Definitions:

Operant Conditioning

An approach to education that utilizes incentives and penalties to shape behavior.

Instrumental Conditioning

A learning process in which an individual alters behavior due to the association of actions with punishments or rewards.

Classical Conditioning

The process of learning where, through continuous pairing, a reaction initially provoked by the second of two stimuli is eventually provoked by the first stimulus.

Preparedness

The state of being readily equipped or mentally ready to handle situations or to undertake specific tasks.