A Share Buyback

question 53

Multiple Choice

A share buyback:

• A)could be used by management to signal that shares are not overvalued.
• B)is an indication that the company has good investment opportunities,thus leading to an increase in the share price.
• C)has the same tax treatment as dividend.
• D)none of the given options apply.

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Definitions:

AVC

Average Variable Cost is the total variable costs divided by the quantity of output, representing the variable cost per unit of output.

MC = MR

An economic principle stating that to maximize profits, firms should produce up to the point where marginal cost equals marginal revenue.

MC = MR

The principle that profit maximization occurs when a firm's marginal cost (MC) equals its marginal revenue (MR).

Economic Profit

The difference between total revenue and total costs, including both explicit and implicit costs, representing the surplus revenue after accounting for all costs.