10. Stock repurchases Aa Aa There are a number of reasons why a firm might want

Question

10. Stock repurchases Aa Aa There are a number of reasons why a firm might want to repurchase its own stock. Read the statement and then answer the corresponding question about the company's motivation for the stock repurchase: Washington and Jefferson Inc.'s board of directors has decided to repurchase some of its stock on the open market because the company has received a large, one-time cash flow, and it believes that the company's stock is undervalued What is the company's motivation for the stock repurchase? O To adjust the firm's capital structure O To acquire shares needed for employee options or compensation O To protect against a takeover attempt O To distribute excess funds to stockholders Which of the following statements would be considered advantages of a stock repurchase? Check all that apply. The market generally perceives a stock repurchase as a sign that management believes that the firm's stock is undervalued. Stock repurchases are an effective way to change the firm's capital structure when the amount of equity in the current capital structure is significantly greater than the firm's target capital structure At times, the company will repurchase its stock at a price higher than the true value of the stock.

Explanation / Answer

What is the company’s motivation for the stock repurchase?

Answer:              To distribute excess funds stockholders

Reason:              There are various reasons for Share repurchase but in the given scenario the company has received large one-time cash flow and it shows that the company wanted to distribute it to the shareholder hence it is excess of requirement.

2. Which of the following statements would be considered advantages of a stock repurchase? Check all that apply

Answer

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