Which of the Following Statements Is False

question 23

Multiple Choice

Which of the following statements is false?

• A) When a firm pays a dividend, shareholders are taxed according to the dividend tax rate. If the firm repurchases shares instead, and shareholders sell shares to create a homemade dividend, the homemade dividend will be taxed according to the capital gains tax rate.
• B) When the tax rate on dividends exceeds the tax rate on capital gains, shareholders will pay lower taxes if a firm uses share repurchases for all payouts rather than dividends.
• C) Firms that use dividends will have to pay a lower after-tax return to offer their investors the same pre-tax return as firms that use share repurchases.
• D) The optimal dividend policy when the dividend tax rate exceeds the capital gain tax rate is to pay no dividends at all.

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Definitions:

Water Mattresses

Mattresses filled with water, used to reduce pressure on the skin and help prevent bedsores, providing support and comfortable positioning for patients with limited mobility.

Dependent Edema

Swelling caused by the accumulation of fluid in the tissues, often affecting the lower legs and feet due to gravity when sitting or standing.

Low-air-loss Mattress

A type of mattress designed to reduce pressure on the skin by using airflow, often used for patients at risk of bed sores.

Bed Rest

A medical treatment recommendation where a patient is advised to lie down and limit physical activity, often to speed up recovery.