Answered step by step
Verified Expert Solution
Question
1 Approved Answer
Which of the following statements about dividends and share repurchases is NOT true? A. Firms pay dividends for a variety of reasons, including getting rid
Which of the following statements about dividends and share repurchases is NOT true? A. Firms pay dividends for a variety of reasons, including getting rid of extra cash, signaling future profitability to outside investors, and attracting investors who have a preference for dividend-paying stocks B. For a long time, the U.S. SEC viewed repurchases as a potential form of illegal "stock price manipulation"... A rule was later passed in 1982 to make repurchases "legal", leading to the large volume of repurchases we see today C. Not all firms pay dividends; for these firms, investors can use a variety of other approaches to estimating firm value, including estimating free cash flow to determine enterprise value or using a valuation multiples approach and comparing the firm to its peers D. All else being equal, many investors prefer receiving dividends rather than share repurchases, since capital gains from repurchases are taxed but dividend payments are untaxed at the investor level (more specifically, they only taxed once at the corporate level)
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started