Which of the Following Statements Is FALSE

question 30

Multiple Choice

Which of the following statements is FALSE?

• A)Individuals in the highest tax brackets have a preference for stocks that pay high dividends,whereas tax-free investors and corporations have a preference for stocks with no or low dividends.
• B)To compare investor preferences,we must quantify the combined effects of dividend and capital gains taxes to determine an effective dividend tax rate for an investor.
• C)The dividend-capture theory states that absent transaction costs,investors can trade shares at the time of the dividend so that non-taxed investors receive the dividend.
• D)Differences in tax preferences create clientele effects,in which the dividend policy of a firm is optimized for the tax preference of its investor clientele.