Which of the Following Circumstances Is Likely to Motivate a Firm

question 86

Multiple Choice

Which of the following circumstances is likely to motivate a firm to repurchase some of its stock?

• A) Management believes that the stock's market price is below its intrinsic value.
• B) The firm has excess cash.
• C) Institutional investors prefer stock repurchases to cash dividends.
• D) All of the above.

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Definitions:

Funds

Funds refer to financial resources allocated for a specific purpose, such as investment or expenses.

Interest Rate

The percentage of principal charged by the lender for the use of its money or the rate earned on investments.

Loan

A sum of money that is borrowed, often from a financial institution, which is expected to be paid back with interest.

Annual Interest Rate

The percentage increase in money that borrowers pay lenders over a year, typically applied to loans and savings.