Which of the following statements is NOT true?
A)Stock repurchases can be used by a firm as part of a plan to change its capital structure.
B)After a 3-for-1 stock split, a company's price per share should fall, but the number of shares outstanding will rise.
C)Investors can interpret a stock repurchase program as a signal that the firm's managers believe the stock is undervalued.
D)Stockholders pay no income tax on dividends if the dividends are used to purchase stock through a dividend reinvestment plan.

Question

Quizplus · Accepted Answer

Stockholders do not avoid paying income tax on dividends by reinvesting them through a dividend reinvestment plan. While they do not receive the dividend as cash, the value of the reinvested dividend is still considered taxable income.

Which of the Following Statements Is NOT True