Which of the Following Is a Reason for a Firm

question 4

Multiple Choice

Which of the following is a reason for a firm for repurchasing its shares?

• A) to diminish the shareholder value by increasing the number of shares outstanding and thereby raising earnings per share
• B) to help encourage a friendly takeover by increasing the number of publicly traded shares
• C) to make shares available for stock option plans
• D) to make shares available for cash dividends

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Definitions:

Expected Growth Rate

The anticipated rate at which a company, asset, or economy is expected to grow in the future.

Rate of Return

The gain or loss of an investment over a specified period, expressed as a percentage of the investment’s cost.

Dividend

A payment made by a corporation to its shareholders, usually in the form of cash or stock, from its profits or reserves.

Liquidation Value

Net amount that could be realized by selling the assets of a firm after paying the debt.