In Which of the Following Situations Might a Stock Repurchase

question 34

Multiple Choice

In which of the following situations might a stock repurchase result in increased firm value?

• A)when a firm does an open market, rather than an auction-based, repurchase
• B)when a firm executes a targeted repurchase in order to buy back shares from specific shareholders at above-market prices
• C)when a firm without any positive NPV projects executes a repurchase to distribute excess cash flow to the shareholders
• D)Stock repurchases never increase or decrease the value of the firm.

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Definitions:

Unit Elastic

A situation in economics where a change in the price of a product leads to a proportional change in the quantity demanded or supplied, resulting in an elasticity of exactly one.

Tax

A compulsory financial charge or levy imposed by a government on individuals or businesses to fund public expenditures.

State Government

The government of a specific state within a country, which operates under that country's constitution to manage local laws and regulations.

Profit

The financial gain realized when the amount earned from a business activity exceeds the expenses, costs, and taxes.