Which of the following statements is FALSE?Video: 6.C. P17-25 (Payout policy with taxes)Group of answer choicesA) Unlike with capital structure, taxes are not an important market imperfection that influence a firm's decision to pay dividends or repurchase shares.D) The optimal dividend policy when the dividend tax rate exceeds the capital gains tax rate is to pay no dividends at all.C) When the tax rate on dividends exceeds the tax rate on capital gains, shareholders will pay lower taxes if a firm uses share repurchases for all payouts rather than dividendsB) If dividends are taxed at a higher rate than capital gains, shareholders will prefer share repurchases to dividends.

2. Which of the following statements is FALSE?Video: 6.B. P5-16 (Payout policy with perfect markets)Group of answer choicesD) In perfect capital markets, investors are indifferent between the firm distributing funds via dividends or share repurchases. By reinvesting dividends or selling shares, they can replicate either payout method on their own.C) In perfect capital markets, an open market share repurchase has no effect on the stock price, and the stock price is the same as the ex-dividend price if a dividend were paid instead.B) In a perfect capital market, when a dividend is paid, the share price drops by the amount of the dividend when the stock begins to trade ex-dividend.A) In perfect capital markets, holding fixed the investment policy of a firm, the firm’s choice of dividend policy is irrelevant and does not affect the initial share price.

4. Which of the following statements is FALSE?Video: 6.D. P26-33 (Other considerations)Group of answer choicesD After adjusting for investor taxes, there remains a substantial tax advantage for the firm to retain excess cash.C) In perfect capital markets, if a firm invests excess cash flows in financial securities, the firm’s choice of payout versus retention is irrelevant and does not affect the initial share price.A) A firm must balance the tax costs of holding cash with the potential benefits of financial flexibility to profit from future growth opportunities.B) Paying out excess cash through dividends or share repurchases can boost the stock price by reducing managers’ ability and temptation to waste resources.

Which of the following statements is  NOT correct?A.One cannot tax both  the company and the shareholder for the same profit.B.Companies had paid 30% tax before distributing their dividends.C.The tax already paid by the company will offset the shareholder taxes that are due.D.The shareholder needs to include the dividend after tax into his or her taxable income.

MM Proposition I does not work with corporate taxes because Blank______.Multiple choice question.dividends are tax deductiblelevered firms pay lower taxes than unlevered firmslevered firms pay more taxes than unlevered firms

Which of the following statements is FALSE?Video: 6.D. P26-33 (Other considerations)Group of answer choicesC) A stock dividend reduces the equity value like share repurchases.D) If the price of the stock falls too low, a company can engage in a reverse split and reduce the number of shares outstandingB) If a company declares a 10% stock dividend, each shareholder will receive one new share of stock for every 10 shares already owned.A) A typical motivation for a stock split is to keep the share price in a range thought to be attractive to small investors.