Which of the following statements is FALSE?
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.
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.
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.
D) 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.
Answer: C
You might also like to view...
A film company has a high market share in the children's film market. The children's film market has low growth potential. This business fits into the ________ category of the BCG growth-market share matrix
A) problem child B) dog C) cash cow D) star E) question mark
When a firm purchases shares directly from a major shareholder it is also known as a(n) ________
A) open market purchase B) tender offer C) targeted repurchase D) greenmail