Which of the Following Statements Is FALSE

question 65

Multiple Choice

Which of the following statements is FALSE?

• A)In perfect capital markets,holding fixed the investment policy of a firm,the firm's choice of dividend policy is irrelevant and does not affect the initial share price.
• B)In a perfect capital market,when a dividend is paid,the share price drops by the amount of the dividend when the stock begins to trade ex-dividend.
• C)In perfect capital markets,an open market share repurchase has no effect on the stock price,and the stock price is the same as the ex-dividend price if a dividend were paid instead.
• D)In perfect capital markets,investors are indifferent between the firm distributing funds via dividends or share repurchases.By reinvesting dividends or selling shares,they can replicate either payout method on their own.

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Definitions:

Debt Securities

Financial instruments representing money borrowed that must be repaid, such as bonds, bills, or notes.

Model Business Corporation Act

A model set of laws prepared by legal experts to guide states in the development of their corporate statutes.

Shares

Units of ownership in a corporation or financial asset that represent an equal proportion of its capital.

Benefit

An advantage, profit, or gain received or enjoyed by an individual or entity, often as a result of a contract, employment, or other agreement.