Which of the Following Statements Is FALSE

question 38

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 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.
• C)In perfect capital markets, an open market share repurchase has no effect on the share price, and the share price is the same as the ex-dividend price if a dividend were paid instead.
• D)In a perfect capital market, when a dividend is paid, the share price drops by the amount of the dividend when the share begins to trade ex-dividend.

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Definitions:

Variable Cost

A cost that varies with the level of output or activity.

Fabrication Department

A section within manufacturing focused on constructing parts or products by cutting, shaping, and assembling components.

Service Costs

Expenses incurred in delivering services to customers, including labor, materials, and overhead related to the service operation.

Return on Investment

A financial performance measure used to evaluate the efficiency or profitability of an investment, calculated as the net profit divided by the cost of the investment.