Assignment 14-Distributions to Shareholders: Dividends and Share Repurchases Due
ID: 2793817 • Letter: A
Question
Assignment 14-Distributions to Shareholders: Dividends and Share Repurchases Due Today at 11:59 PM CST Sixty-second Avenue Company has forecasted a net income of $5,100,000 for this year. Its common stock currently trades at $18 per share, and the company currently has 720,000 shares of common stock outstanding. It has sufficient funds available to pay a cash dividend, but many of its investors don't like the additional tax liability to which the dividend income subjects them. As a result, Sixty-second Avenue's management is considering making a share repurchase transaction in which it would buy back 70,000 shares of its outstanding shares in the open market by paying the current market share price. Assume that the repurchase transaction will have no effect on either the company's net income or its price-to-earnings (P/E) ratio. What is Sixty-second Avenue's expected stock price after the stock repurchase transaction? O $21.93 per share $19.94 per share O $24.93 per share O $17.95 per share Which of these factors are considered an advantage of a stock repurchase? Check all that apply A repurchase can remove a large block of stock that is overhanging the market and keeping the per-share price depressed. When a firm distributes cash by repurchasing stock, stockholders have the option to either sell or not sell stock Stockholders who sell their stock back to the company might claim that they were not made fuily aware of all implications of the repurchase.Explanation / Answer
Answer ) The main advantage of stock repurchase is
Option 1) If for any reason the comapny share price is low i.e when the economy not doing well etc. Then the comapany can but back the shares to support the price of the stock