True or False,why? 1) Stock buybacks should be considered with other alternative

Question

True or False,why?

1) Stock buybacks should be considered with other alternative investments, using the same criteria of payback, NPV or IRR.

2) A stock repurchase will increase an organization’s earnings per share.

3) A stock dividend is a lower cost alternative to a cash dividend and can be considered at all but the initial stages of a corporate life cycle.

4) As an alternative to stock options, the award of performance shares based on an objective performance measure are favored by institutional investors.

Explanation / Answer

1) True. It is also a good way of presenting the investment and calculating the return of that investment in terms of payback period.

2) True. As it will reduce the number of shares outstanding, so EPS would increase given the earning remains constant.

3) False. Stock dividend is a low cost alternative but it cannot be used at the initial stages of corporate life cycle.

4) True. As it is linked with performance and much more comprehensive, so institutional investors like such kind of incentives.

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