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.
Answer: D
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Fill in the blank(s) with the appropriate word(s).
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What will be an ideal response?
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