From the Firm's Point of View, a Major Advantage of Stock

question 39

Multiple Choice

From the firm's point of view, a major advantage of stock repurchases over cash dividends is

• A) a commitment to maintain or increase repurchases every year.
• B) a stronger signal about the firm's financial strength.
• C) that they restrain agency costs.
• D) that the repurchases imply no commitment to pay the same amount or more every year.

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Definitions:

Real Rate

The interest rate adjusted for inflation, more accurately reflecting the true cost of borrowing or the real yield on an investment.

Prices Fall

A situation where the monetary value or cost of goods and services decreases over a period of time, often leading to increased consumer demand.

Perfect Substitutes

Goods that can be used in place of each other with no loss of utility to the consumer, often seen as identical in consumption.

Apples

Edible fruits from the apple tree, with a sweet taste and crisp texture, consumed worldwide and used in various cuisines for dishes such as pies, juices, and ciders.