5% MINDTAP Assignment 14-Distributions to Shareholders: Dividends and Share Repu

Question

5% MINDTAP Assignment 14-Distributions to Shareholders: Dividends and Share Repurchases Due Today at 11 59 PM CST Ignoring possible tax effects and signaling costs, the total value of a firm's equity remains the same irrespective of how the firm distributes its residual earnings-dividends or stock repurchases. Each distribution method has certain advantages and disadvantages. Based on your understanding of dividends and stock repurchases, select the best terms to go with the statements Select the best term to complete the sentence Repurchase stock Distribute dividends Excess cash or a desire to recapitalize usually leads management to 2?77. False True Repurchases are more dependable than dividends because the investor wealth does not decrease after a repurchase, whereas the stock price decreases when dividends are distributed. This statement is ???? True False Dividends provide signals about a firm's future prospects whereas some investors might misinterpret why a firm is repurchasing stock. This statement is ???? Saves Increases Repurchase transactions allow a firm to buy back stock that may be needed to fulfill obligations when employees exercise their stock options. This ?7?? the costs associated with issuing new shares. Type here t

Explanation / Answer

a.

Excess cash or a desire to recapitalize usually leads management to Stock repurchase to maintan its target capital structure.

b.

Repurchase are more dependable than dividends because the investor wealth not decrease after repurchase but in case of dividend payment stock price decrease by same amount as dividend paid per share.

given statement is true.

c.

dividend provides signals about a firm future prospects where as some investor might misinterpret why a firm is repurchasing stock.

This statement is true.

d,

Repurchase transactions allow a firm to buyback stock that may be needed to fulfill obligation when employees excecise their stock option. this decrease the cost associated with issueing new stock.

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