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:

Debt

Debt represents money borrowed and to be repaid, typically with interest, by individuals or entities such as corporations and governmental bodies.

Debt Financing

A method of raising capital whereby a company borrows money through issuing bonds or taking out loans, to be repaid over time with interest.

Earnings

The profit a company generates over a specific period, indicating its financial performance.

EPS

Earnings Per Share, a key financial metric that divides a company's profit by the number of its outstanding shares of common stock.