Which of the following statements is most correct?
A) One advantage of stock repurchases is that they are generally taxed more favorably than dividend payments.
B) One advantage of dividend reinvestment plans is that they enable investors to avoid paying taxes on the dividends they receive.
C) Stock repurchases make sense if a company is interested in increasing its equity ratio.
D) Stock repurchases make sense if a company believes that its stock is overvalued and that it has a lot of profitable projects to fund over the next year.
E) One advantage of an open market dividend reinvestment plan is that it increases the number of shares the company has outstanding.

Question

Quizplus · Accepted Answer

Stock repurchases are taxed more favorably than dividend payments because they are considered a capital gain, which has a lower tax rate than ordinary income.

Which of the Following Statements Is Most Correct