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:

Paid

The status of having received money in exchange for goods or services, or as compensation for work done.

State Revenue

The total income generated by a government from taxes, fees, and governmental activities to fund public services and initiatives.

Local Revenue

Funds generated by taxes, fees, and other charges that are collected by local governments to finance public services and infrastructure.

Property Tax

A levy on property that the owner is required to pay, usually based on the value of the property.