Assume There Are No Taxes or Imperfections

question 3

Multiple Choice

Assume there are no taxes or imperfections.Given this assumption,which one of the following statements is correct?

• A)Stock repurchases decrease the market value per share.
• B)A cash dividend decreases shareholder wealth.
• C)A share repurchase has the same effect on a firm's market value balance sheet as does a cash dividend.
• D)A cash dividend has no effect on the market price of the payer's stock.
• E)Both a cash dividend and a share repurchase increase a firm's PE ratio.

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Definitions:

Privileged Domain

Areas of knowledge or skill in which individuals may demonstrate exceptional ability or expertise.

Reasoning

The mental process of generating conclusions, judgments, or inferences from facts or premises.

Naïve Psychology

An everyday, common-sense psychology that people use to understand and explain their own and others' behaviors.

Mental States

The condition of one's mind or psychological being at a particular time, including thoughts, feelings, and consciousness.