Which of the Following Statements Is Correct

question 112

Multiple Choice

Which of the following statements is correct?

• A) A key advantage of the residual dividend policy is that it usually results in a stable dividend policy which is attractive to investors.
• B) Investors should prefer that a corporation repurchase its common stock when the stock is overpriced.
• C) A reduction in the capital gains rate should work to discourage corporations from repurchasing their shares.
• D) The theory that investors prefer dividends rather than capital gains suggests that firms that increase their dividend payout should expect to realize a higher share price and a lower cost of equity capital.
• E) Answers c and d are both correct.

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Definitions:

Effective Challenges

Opposing or difficult situations that, when overcome, lead to personal growth or achievement.

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The ability to think in new and original ways, coming up with innovative solutions to problems.

Heuristics

A problem-solving approach using practical methods and shortcuts to produce solutions within a reasonable time frame.

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Very specific, step-by-step procedures for solving certain types of problems.