Which of the following statements is CORRECT?
A) If a firm repurchases some of its stock in the open market,then shareholders who sell their stock for more than they paid for it will be subject to capital gains taxes.
B) An open-market dividend reinvestment plan will be most attractive to companies that need new equity and would otherwise have to issue additional shares of common stock through investment bankers.
C) Stock repurchases tend to reduce financial leverage.
D) If a company declares a 2-for-1 stock split,its stock price should roughly double.
E) One advantage of adopting the residual dividend model is that this makes it easier for corporations to meet the requirements of Modigliani and Miller's dividend clientele theory.

Question

Quizplus · Accepted Answer

A) Shareholders who sell their stock at a profit in an open market transaction, such as a stock repurchase by the company, will indeed be subject to capital gains taxes on the difference between their sale price and their original purchase price.

Which of the Following Statements Is CORRECT