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.

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Definitions:

Loss

A financial situation where expenses exceed revenues, or when an investment's value decreases compared to its purchase price.

Price

The monetary value assigned to a product or service, determined by various factors including supply, demand, and production costs.

Diagram

A simplified drawing or plan that represents facts, figures, or ideas through symbols, shapes, or lines.

Equilibrium Price

The cost at which the amount of a product sought by consumers matches the amount available from suppliers, leading to equilibrium in the market.