Which of the Following Statements Is Correct

question 39

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:

Barbiturate

A class of drugs derived from barbituric acid, used as sedatives and hypnotics.

Sleep Aid

Products or practices that facilitate the onset of sleep or improve the quality of sleep, including medications, natural remedies, or behavioral techniques.

Opium

Substance derived from the opium poppy from which all narcotic drugs are derived.

Narcotics

Drugs that relieve pain and induce sleep, often used medically for pain relief, but can be subject to misuse and addiction.