Under What Circumstances Would a Firm Engage in Share Repurchases

question 5

Multiple Choice

Under what circumstances would a firm engage in share repurchases rather than increasing dividends?

• A)If the firm has excess free cash flow that management expects will continue indefinitely.
• B)If the firm has excess free cash flow that management expects will be only temporary.
• C)If shareholders are in a lower tax bracket for dividends than for realized capital gains.

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Definitions:

Smartphones

Mobile devices that combine features of a traditional mobile phone with those of other popular consumer gadgets, like personal digital assistants, media players, and GPS navigation units.

Imperishable Goods

Items or products that do not deteriorate in quality or value over time, such as diamonds or precious metals.

Reusable Goods

Products designed to be used multiple times, reducing waste and environmental impact compared to disposable items.

Nondisposable Goods

Products designed for long-term use and not intended to be thrown away after a few uses, such as appliances or furniture.