Which of the following statements is correct?
A) Capital gains earned in a share repurchase are taxed less favorably than dividends;this explains why companies typically pay dividends and avoid share repurchases.
B) Very often,a company's stock price will rise when it announces that it plans to commence a share repurchase program.Such an announcement could lead to a stock price decline,but this does not normally happen.
C) Stock repurchases increase the number of outstanding shares.
D) The clientele effect is the best explanation for why companies tend to vary their dividend payments from quarter to quarter.
E) If a company has a 2-for-1 stock split,its stock price should roughly double.

Question

Quizplus · Accepted Answer

When a company announces a share repurchase program, it signals to the market that management believes the current stock price is undervalued. This can lead to an increase in demand for the stock and a rise in price. While there is always some risk involved, it is not typical for a share repurchase announcement to lead to a decline in stock price.

Which of the Following Statements Is Correct