Which of the Following Statements Is Correct

question 22

Multiple Choice

Which of the following statements is correct?

• A) The clientele effect can explain why so many firms change their dividend policies so often.
• B) One advantage of adopting the residual dividend policy is that this policy makes it easier for corporations to develop a specific and well-identified dividend clientele.
• C) New-stock dividend reinvestment plans are similar to stock dividends because they both increase the number of shares outstanding but don't change the firm's total amount of book equity.
• D) Investors who receive stock dividends must pay taxes on the value of the new shares in the year the stock dividends are received.
• E) If a firm follows the residual dividend policy, then a sudden increase in the number of profitable projects is likely to reduce the firm's dividend payout.

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Definitions:

Blacks

A term historically used to refer to individuals of Sub-Saharan African descent, now more commonly referred to as African Americans or Black people in the context of the United States.

Indians

Indigenous peoples of the Americas; often referred to in contexts related to the original inhabitants of the land prior to European colonization.

Independent Treasury

A system used by the United States in the 19th century whereby the government managed its own funds independently of the national banking and financial systems.

Federal Government

The national government of a federal country, which holds the authority to govern shared matters while coexisting with the governments of the individual states.