Which One of the Following Statements Related to Stock Repurchases

question 11

Multiple Choice

Which one of the following statements related to stock repurchases is correct?

• A)An open market stock repurchase increases the total wealth of a shareholder if you ignore taxes, costs, and market imperfections.
• B)Targeted repurchases must be offered to all shareholders but can be done in steps such that only a portion of the shareholders have the option to sell at any one point in time.
• C)When a firm wishes to repurchase shares in the open market, it will do so in a special trading session that is set up by the SEC.
• D)A firm may spend more cash over the course of a year on stock repurchases than it does on cash dividends.
• E)Tender offer prices must be set equal to the opening market price on the day the tender offer is announced.

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Definitions:

Price Elasticity

A measure of how much the quantity demanded of a good responds to a change in the price of that good, expressed as a percentage.

Demand Function

A mathematical representation that describes the quantity of a good or service consumers are willing and able to purchase at various prices.

Tickets

Documents that grant the holder the right to enter an event, travel on a vehicle, or participate in an activity.

Price Elasticity

Measures the responsiveness of quantity demanded or supplied of a good to a change in its price, with elasticity types including elastic, inelastic, and unitary.