Green Corporation Purchases 40,000 Shares of Its Own $10 Par

question 22

Multiple Choice

Green Corporation purchases 40,000 shares of its own $10 par value common stock for $25 per share. What will be the effect on stockholders' equity?

• A) Increase $400,000
• B) Increase $1,000,000
• C) Decrease $400,000
• D) Decrease $1,000,000

Recognize the relationship between bond terms, default risks, and interest rates.

Understand how the issuance of new shares affects stock supply and price.

Gain knowledge about the borrowing process for firms through bond issuance.

Understand the concept of risk and return in investment decisions.

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Definitions:

EPS

Earnings Per Share, a measure of a company's profitability that is calculated by dividing its net income by the number of outstanding shares.

Stock Repurchase

The process of a corporation repurchasing its own stocks from the market to potentially boost the value of the remaining stocks.

Excess Cash

Additional cash held by a business that exceeds its operational and investment needs.

Earnings Per Share

A financial metric that measures the total earnings available to shareholders divided by the number of shares outstanding.