Which of the Following Statements Is FALSE

question 39

Multiple Choice

Which of the following statements is FALSE?

• A)Unlike with capital structure,taxes are not an important market imperfection that influence a firm's decision to pay dividends or repurchase shares.
• B)If dividends are taxed at a higher rate than capital gains,which has been true until the most recent change to the tax code,shareholders will prefer share repurchases to dividends.
• C)Shareholders typically must pay taxes on the dividends they receive.They must also pay capital gains taxes when they sell their shares.
• D)Because long-term investors can defer the capital gains tax until they sell,there is still a tax advantage for share repurchases over dividends.

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Definitions:

Transactions

The actions carried out between two parties that result in the exchange of goods, services, or financial assets.

Treasury Stock

Shares that were once part of the outstanding shares of a company but were subsequently repurchased by the company and are held in its treasury.

Stockholders' Equity

Refers to the owners' residual interest in the assets of a corporation, after deducting liabilities.

Dividend Yield

A financial measurement showcasing the ratio of a company's annual dividend payment to its current stock price.