A stock repurchase program:
A)requires all shareholders to sell a fraction of their shares.
B)is preferred over a high-dividend program only by tax-exempt shareholders.
C)decreases both the number of shares outstanding and the market price per share.
D)has no effect on a firm's financial statements.
E)is essentially the same as a cash dividend program provided there are no taxes or other costs.

Question

Quizplus · Accepted Answer

Stock repurchase programs and cash dividend programs are essentially similar in their effect on shareholder wealth in a world without taxes, transaction costs, or other market imperfections. Both methods return cash to shareholders, but through different mechanisms.

A Stock Repurchase Program