Suppose a Firm Does Not Pay a Dividend but Repurchases

question 33

Multiple Choice

Suppose a firm does not pay a dividend but repurchases shares using $20 million of cash. The market value of the firm decreases by

• A)-$20 million.
• B)0.
• C)$20 million.
• D)cannot say for sure

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Definitions:

Target Profit

Target profit is the amount of net income a company aims to achieve for a specific period as part of its financial and operational goals.

Break-Even Sales

The amount of revenue from sales needed to cover all fixed and variable expenses, at which point a business neither profits nor loses money.

Contribution Margin Ratio

A financial metric indicating the portion of sales revenue that is not consumed by variable costs, represented as a percentage of total sales.

Monthly Fixed Expense

Regular, unchanging expenses that occur on a monthly basis, such as rent or salaries, regardless of business activity levels.