1. According to our class discussion, in an imperfect world where taxes and transactions costs are present, which of the following statements are generally true?

(a) a firm should not pursue a policy of issuing shares to pay dividends

(b) returning cash to investors via a share repurchase rather than a dividend payment is more tax efficient (i.e., results in lower personal taxes)

(c) the firm should return all excess cash to investors via either share repurchases or dividends

(d) a and b

(e) b and c

2. Which of the following statements is true?

(a) The fraction of U.S. firms that pay dividends has remained approximately constant over the past 20 years

(b) Share repurchase activity has increased sharply over the past 20 years

(c) Consistent with the Modigliani and Miller irrelevance arguments, the market generally does not react in any significant way to announcements of a change in a firm's dividend payment?

(d) a and b

(e) a and c

(f) b and c

(g) a and b and c