Which of the following statements is correct?
Open market purchase plans benefit small stockholders who do not need current cash dividends because of low brokerage costs resulting from volume purchases.
An open market purchase plan is a good option for firms that need to change their capital structure because, with this type of dividend reinvestment plan, the firms issue new shares of common stock to investors who reinvest their dividends.
One disadvantage of a new stock plan is that, because new shares of common stock are being issued, the firm incurs flotation costs that it passes on to its investors.
Dividend reinvestment plans provide current stockholders with the opportunity to automatically reinvest their dividends in shares of the company's preferred stock.
Which of the following statements is correct?
| Open market purchase plans benefit small stockholders who do not need current cash dividends because of low brokerage costs resulting from volume purchases. | ||
| An open market purchase plan is a good option for firms that need to change their capital structure because, with this type of dividend reinvestment plan, the firms issue new shares of common stock to investors who reinvest their dividends. | ||
| One disadvantage of a new stock plan is that, because new shares of common stock are being issued, the firm incurs flotation costs that it passes on to its investors. | ||
| Dividend reinvestment plans provide current stockholders with the opportunity to automatically reinvest their dividends in shares of the company's preferred stock. |
