Which one of the following statements related to stock repurchases is correct?
A)An open market stock repurchase increases the total wealth of a shareholder if you ignore taxes, costs, and market imperfections.
B)Targeted repurchases must be offered to all shareholders but can be done in steps such that only a portion of the shareholders have the option to sell at any one point in time.
C)When a firm wishes to repurchase shares in the open market, it will do so in a special trading session that is set up by the SEC.
D)A firm may spend more cash over the course of a year on stock repurchases than it does on cash dividends.
E)Tender offer prices must be set equal to the opening market price on the day the tender offer is announced.

Question

Quizplus · Accepted Answer

A firm may choose to spend more cash over the course of a year on stock repurchases than on cash dividends. This depends on the priorities and goals of the firm, as well as the availability of cash. However, it is important to note that while open market stock repurchases may increase the total wealth of a shareholder if certain factors (such as taxes and market imperfections) are ignored, this statement is not completely accurate. Targeted repurchases do not necessarily have to be offered to all shareholders, but they must be offered to all shareholders within a given class. Additionally, there is no special trading session set up by the SEC for open market stock repurchases. Finally, tender offer prices are not required to be set equal to the opening market price on the day the offer is announced.

Which One of the Following Statements Related to Stock Repurchases