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

question 5

Essay

Show that a stock repurchase is conceptually the same as a cash dividend for a shareholder with 100 shares 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:

Domestic Violence

A pattern of abusive behavior in any relationship that is used by one partner to gain or maintain control over another intimate partner.

Abusive Spouse

An individual in a marital or intimate relationship who uses physical, emotional, sexual, or psychological means to exert power and control over their partner.

Annual Exam

A yearly medical check-up to assess health status, screen for diseases, and discuss preventative care strategies.

Menstrual Period

A monthly cycle in individuals with a uterus where the lining of the uterus is shed if pregnancy does not occur, typically resulting in bleeding.