How Stock Repurchases Differ from Dividends: ABC Co

question 58

Multiple Choice

How stock repurchases differ from dividends: ABC Co. has a policy of returning a minimum of 40 percent of earnings to shareholders every year through dividend issues and open-market stock repurchases. In each quarter this year, the company earned $0.20 per share. In each of the first three quarters, the company paid a regular cash dividend of $0.05 per share. The company has 8 million shares of common stock outstanding. What combination of dividends and stock repurchases could the company's board approve to meet their target payout percentage?

• A) A regular cash dividend of $0.05
• B) A regular cash dividend of $0.05 per share and an open-market stock repurchase of $960,000 in stock
• C) A regular cash dividend of $0.05 per share and a special dividend of $0.12
• D) Both b and c will meet the target payout percentage

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Definitions:

Stage of Change

A component of the Transtheoretical Model that describes the process individuals go through in changing their behavior, ranging from precontemplation to maintenance.

Therapy Clients

Individuals who engage in therapy seeking assistance for psychological, emotional, or behavioral issues with the help of a professional therapist.

Intrapersonal Level

Pertains to internal mental processes, emotions, and cognitions within an individual.

Preparation Stage

A phase in the Stages of Change model where individuals are intending to take action in the near future to address or change a behavior.