If You Ignore Taxes and Transaction Costs,a Stock Repurchase Will

question 51

Multiple Choice

If you ignore taxes and transaction costs,a stock repurchase will: I. reduce the total assets of a firm.
II) increase the earnings per share.
III) reduce the PE ratio more than an equivalent stock dividend.
IV) reduce the total equity of a firm.

• A) I and III only
• B) II and IV only
• C) I, II, and IV only
• D) I, III, and IV only
• E) I, II, III, and IV

---

Definitions:

Pure Play Approach

A method of evaluating investment risk by focusing on a single industry or sector, assuming the business operates solely within that domain.

Definition

A statement expressing the essential nature of something.

Operating Cash Flow

This refers to the cash generated from a company's regular business operations, indicating its ability to generate sufficient positive cash flow to maintain and grow its operations.

Weighted Average Flotation Cost

The average cost of issuing new securities, weighed by the proportion each method of financing contributes to the total new financing, considering costs like underwriting fees and legal expenses.