Show That a Stock Repurchase Is Conceptually the Same as a Cash

question 86

Essay

Show that a stock repurchase is conceptually the same as a cash dividend using the following example: Repo Corp.has 1,000 shares outstanding at a market price of $20 per share.In debating whether to declare a 5% cash dividend,the directors instead chose to repurchase 50 of the outstanding shares.

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Definitions:

Heart

A muscular organ responsible for pumping blood through the circulatory system.

Mitral Valve

A valve in the heart that allows blood to flow from the left atrium into the left ventricle but prevents it from flowing back into the atrium.

Atrioventricular Valve

Heart valves located between the atria and ventricles of the heart, facilitating unidirectional blood flow.

Bicuspid Valve

A valve in the heart that has two cusps or flaps, and controls blood flow between the left atrium and the left ventricle; also known as the mitral valve.