Which of the Following Statements Is Correct

question 51

Multiple Choice

Which of the following statements is correct?

• A) One nice feature of dividend reinvestment plans (DRIPs)is that they reduce the taxes investors would have to pay if they received cash dividends.
• B) Empirical research indicates that,in general,companies send a negative signal to the marketplace when they announce an increase in the dividend,and as a result share prices fall when dividend increases are announced.The reason is that investors interpret the increase as a signal that the firm has relatively few good investment opportunities.
• C) If a company wants to raise new equity capital rather steadily over time,a new stock dividend reinvestment plan would make sense.However,if the firm does not want or need new equity,then an open market purchase dividend reinvestment plan would probably make more sense.
• D) Dividend reinvestment plans have not caught on in most industries,and today about 99% of all companies with DRIPs are utilities.
• E) Under the tax laws as they existed in 2008,a dollar received for repurchased stock must be taxed at the same rate as a dollar received as dividends.

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Definitions:

Plaintiff

The party who brings a lawsuit or legal action against another (the defendant) in a court of law, claiming to have incurred loss or damage.

Criminal Law

A body of laws pertaining to crimes and punishment, involving regulations that define conduct prohibited by the government because it threatens and harms public safety and welfare.

Public Law

A branch of law that deals with the relationship between individuals and the government, including administrative law, constitutional law, and criminal law.

Plea Bargain

An agreement in a criminal case between the prosecutor and defendant, wherein the defendant agrees to plead guilty to a lesser charge or to the original criminal charge in return for some concession from the prosecutor.