Which of the following statements is CORRECT?
A. If a company has a 2-for-1 stock split, its stock price should roughly double.
B. Capital gains earned on shares repurchased are taxed less favorably than dividends, which is why companies typically pay dividends and avoid share repurchases.
C. 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.
D. Stock repurchases increase the number of outstanding shares.
E. The clientele effect is the best explanation for why companies tend to vary their dividend payments from quarter to quarter.
Answer: C
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