Which of the Following Statements Is FALSE

question 42

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 rather than dividends for all payouts.
• C) Firms that use dividends will have to pay a lower after-tax return to offer their investors the same pretax 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:

Selection Process

The method by which candidates are screened and selected for a position, task, or inclusion in a study, often involving steps like application, assessment, and interview.

Expected Value

The anticipated value of a variable in a probability distribution; it represents the mean of the distribution.

Pooled Variance Estimate

An estimate of variance that combines the variances from two or more samples, assuming that the variances from the different populations are the same.

Population Variances

refer to the measure of the dispersion of data points in a population.