Corporate Finance (4th Edition) (Pearson Series in Finance) - Standalone book
Corporate Finance (4th Edition) (Pearson Series in Finance) - Standalone book
4th Edition
ISBN: 9780134083278
Author: Jonathan Berk, Peter DeMarzo
Publisher: PEARSON
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Chapter 17.2, Problem 1CC
Summary Introduction

To discuss: Whether the price that rises under the repurchase of firm’s own shares, because of a decrease in the supply of outstanding shares is true or false.

Introduction:

Share repurchase is an alternative method used to pay the cash to the company’s investors by the way of buy back of shares. When a company purchases its own shares, which remains outstanding, it is known as stock repurchases.

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Students have asked these similar questions
5) What is a share buyback?A) An opportunity for the company to increase dividends without sending a signal that leads to a fall in the share priceB) An opportunity for shareholders to receive additional shares in proportion to their existing holding instead of the normal cash dividendC) A method by which the company can raise the level of borrowings on its balance sheetD) A mechanism by which the company buys a proportion of its own shares from investors
The price of the new share after dividends are paid is showing as incorrect?
When a stock repurchase occurs, which of the following is not correct?a. EPS decreasesb. Shares are repurchased then cancelledc. Investors may regard this as a tax break compared to a dividend paymentd. Costs in servicing small shareholders may be reducede. All of the above are correct

Chapter 17 Solutions

Corporate Finance (4th Edition) (Pearson Series in Finance) - Standalone book

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