Which statement is correct?
A) the dividend discount model is no longer applicable when there are stock repurchases.
B) when valuing free cash flow per share it is important to include both dividends per share and the cash received from repurchases.
C) shareholders like dividends because it is the only way that they can get their hands on cash.
D) if capital investment and capital structure are held constant, smaller dividends mean larger repurchases.

Question

Quizplus · Accepted Answer

If a company maintains its capital investment and capital structure, reducing dividends allows it to use the saved cash for stock repurchases.

Which Statement Is Correct