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.

---

Definitions:

Chemotherapy

A type of cancer treatment using drugs designed to kill or slow the growth of cancer cells.

Jejunostomy Feedings

Nutritional support delivered directly into the jejunum (part of the small intestine) via a surgically created opening.

Gelatin

A colorless and tasteless substance derived from collagen used in food preparation and pharmaceuticals.

Gastric Suction

A medical procedure to remove contents from the stomach through a tube inserted into the mouth or nose.