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Indicate whether the following statements are true or false. If the statement is false, explain why. a. If a firm repurchases its stock in the open market, the shareholders who tender the stock are subject to capital gains taxes. b. If you own 100 shares in a company’s stock and the company’s stock splits two-for-one, you will own 200 shares in the company following the split. c. Some dividend reinvestment plans increase the amount of equity capital available to the firm. d. The tax Code encourages companies to pay a large percentage of their net income in the form of dividends. e. If your company has established a clientele of investors who prefer large dividend, the company is unlikely to adopt a residual dividend policy. f. If a firm follows a residual dividend policy, holding all else constant, its dividend payout will tend to rise whenever the firm's investment opportunities improve.

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Fundamentals of Financial Manageme...

15th Edition
Eugene F. Brigham + 1 other
Publisher: Cengage Learning
ISBN: 9781337395250
BuyFind

Fundamentals of Financial Manageme...

15th Edition
Eugene F. Brigham + 1 other
Publisher: Cengage Learning
ISBN: 9781337395250

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Chapter
Section
Chapter 15, Problem 10Q
Textbook Problem

Indicate whether the following statements are true or false. If the statement is false, explain why.

  1. a. If a firm repurchases its stock in the open market, the shareholders who tender the stock are subject to capital gains taxes.
  2. b. If you own 100 shares in a company’s stock and the company’s stock splits two-for-one, you will own 200 shares in the company following the split.
  3. c. Some dividend reinvestment plans increase the amount of equity capital available to the firm.
  4. d. The tax Code encourages companies to pay a large percentage of their net income in the form of dividends.
  5. e. If your company has established a clientele of investors who prefer large dividend, the company is unlikely to adopt a residual dividend policy.
  6. f. If a firm follows a residual dividend policy, holding all else constant, its dividend payout will tend to rise whenever the firm's investment opportunities improve.

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Chapter 15 Solutions

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