Question

Which of the following statements is​ false? ​(Select the best answer​ below.) A. Most stockholders would prefer a cash dividend due to the lower tax rate on dividend income than on capital gain from repurchase. B. The​ post-repurchase price is higher because there are fewer shares outstanding. C. The​ post-repurchase price is higher than the​ pre-repurchase price by the amount of the cash dividend. D. Cash dividends are taxable to the stockholder. If the firm repurchases​ stock, taxes on the increased value of the stock are deferred until the stock is sold.

Answer 1

A. Most stockholders would prefer a cash dividend due to the lower tax rate on dividend income than on capital gain from repurchase.

Explanation:

When you buy stocks or shares in a company you become a shareholder. When that company earns a profit, it may start to pay back some of the money that had been invested in it. These payments are called dividends and they are usually paid in cash.

A cash dividend is funds or money paid to stockholders generally as part of the corporation's current earnings or accumulated profits. The board of directors must declare the issuing of all dividends and decide if the dividend payment should remain the same or change.

The benefit of a share dividend is choice. The shareholder can either keep the shares and hope that the company will be able to use the money not paid out in a cash dividend to earn a better rate of return, or the shareholder could also sell some of the new shares immediately to create his or her own cash dividend.