Assignment 14-Distributions to Shareholders: Dividends and Share Repurchases Due
ID: 2793781 • Letter: A
Question
Assignment 14-Distributions to Shareholders: Dividends and Share Repurchases Due Today at 11:59 PM CST 10. Stock repurchases There are a number of reasons why a firm might want to repurchase its own stock. Read the statement and then answer the corresponding question about the company's motivation for the stock repurchase: Smith and Martin Co.'s board of directors has decided to repurchase some of its stock on the open market because it wants to increase the company's debt-to-equity ratio. What is the company's motivation for the stock repurchase? O To adjust the firm's capital structure O To protect against a takeover attempt O To distribute excess funds to stockholders O To acquire shares needed for employee options or compensation Which of the following statements would be considered advantages of a stock repurchase? Check all that apply. A stock repurchase can be used to minimize the dilution effect associated with employees exercising their stock options. repurchases allow a firm to reduce the number of outstanding shares, increase the firm's share price, and make a potential takeover of the company more expensive. At times, the company will repurchase its stock at a price higher than the true value of the stock. OType here to searclhExplanation / Answer
a.
There are somany motivations for stock repurchase like, comapny has excess cash, if stock is overvalued, to improve financial ratios. One of the reason of stock repurchase to protect against takeover attempts.
Option (C) is correct answer.
b.
A stock repurchase can be use to minimize the dilution effect associated with employee excercising their stock option. stock repurchase also helps the company in adjust its target capital structure if value of equity in capital structure is higher than target capital structure.
Option(A) and (B) is correct answer.