Which of the Following Statements Is CORRECT

question 12

Multiple Choice

Which of the following statements is CORRECT?

• A) One disadvantage of dividend reinvestment plans is that they increase transactions costs for investors who want to increase their investment in the company.
• B) One advantage of dividend reinvestment plans is that they enable investors to postpone paying taxes on the dividends credited to their account.
• C) Stock repurchases can be used by a firm that wants to increase its debt ratio.
• D) Stock repurchases make sense if a company expects to have a lot of profitable new projects to fund over the next few years,provided investors are aware of these investment opportunities.
• E) One advantage of an open market dividend reinvestment plan is that it provides new equity capital and increases the shares outstanding.

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Definitions:

Average Variable Cost

Variable cost divided by the quantity of output

Unique Goods

Products that are distinct in their characteristics, offering uniqueness that differentiates them from mass-produced items.

Price Discrimination

A strategy in pricing where the same provider sells identical or nearly identical products or services at varying prices across different markets.

Deadweight Loss

The reduction in total societal welfare resulting from market inefficiencies, typically due to taxes, subsidies, or monopolies.