Which of the Following Statements Is CORRECT

question 42

Multiple Choice

Which of the following statements is CORRECT?

• A) Firms with a lot of good investment opportunities and a relatively small amount of cash tend to have above-average dividend payout ratios.
• B) One advantage of the residual dividend model is that it leads to a stable dividend payout,which investors like.
• C) An increase in the stock price when a company cuts its dividend is consistent with signaling theory as postulated by MM.
• D) If the "clientele effect" is correct,then for a company whose earnings fluctuate,a policy of paying a constant percentage of net income will probably maximize its stock price.
• E) Stock repurchases make the most sense at times when a company believes its stock is undervalued.