Which of the following statements is NOT correct?
A) after a 3-for-1 stock split, a company's price per share should fall, but the number of shares outstanding will rise.
B) investors can interpret a stock repurchase program as a signal that the firm's managers believe the stock is undervalued.
C) companies can repurchase shares to distribute large inflows of cash, say from the sale of a division, to stockholders without paying cash dividends.
D) stockholders pay no income tax on dividends if the dividends are used to purchase stock through a dividend reinvestment plan.
E) stock repurchases can be used by a firm as part of a plan to change its capital structure.

Question

Quizplus · Accepted Answer

Stockholders do pay income tax on dividends, even if they are reinvested through a dividend reinvestment plan. However, they may receive a tax credit for any taxes paid by the company on its earnings.

Which of the Following Statements Is NOT Correct