Which one of the following statements related to stock repurchases is correct?
A)U.S. industrial firms have increased their stock repurchases every year for each of the past twenty years.
B)A stock repurchase can be used as a means for incumbent officers to retain control of a firm.
C)A tender offer indicates that a firm is willing and able to purchase how ever many shares the current shareholders wish to sell.
D)All stock repurchases must be identified as such to the selling party.
E)Stock repurchases can be a relatively tax-efficient method of distributing cash to shareholders.

Question

Quizplus · Accepted Answer

Stock repurchases can be a relatively tax-efficient method of distributing cash to shareholders. When a company issues dividends, shareholders are taxed on the dividend income. However, with a stock repurchase, shareholders can choose to sell their shares and realize a capital gain, which is taxed at a lower rate than dividend income. Therefore, stock repurchases can be an attractive option for companies looking to distribute cash to shareholders. Choices A, B, C, and D are incorrect statements related to stock repurchases.

Which One of the Following Statements Related to Stock Repurchases