Which of the following statements is correct? 1) The clientele effect is the bes

Question

Which of the following statements is correct? 1) The clientele effect is the best explanation for why companies tend to vary their dividend payments from quarter to quarter. 2) If a company has a 2-for-1 stock split, its stock price should roughly double. 3) Capital gains earned in a share repurchase are taxed less favorably than dividends; this explains why companies typically pay dividends and avoid share repurchases. 4) Stock repurchases increase the number of outstanding shares. 5) 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.

Explanation / Answer

1. true

2. true

3. false

4. true

5. false

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