Which of the following is true concerning the practice of repurchasing shares when the managers correctly determine that the price of the stock is low?
A)The practice does not benefit either the stockholders who do not sell or those who do sell.
B)The practice benefits the stockholders who do sell more than those who do not sell.
C)The practice benefits stockholders who do not sell and those who do sell equally.
D)The practice benefits the stockholders who do not sell more than those who do sell.

Question

Quizplus · Accepted Answer

When a company repurchases its shares, the demand for the stock increases which in turn raises the stock price. This benefits stockholders who do not sell because they hold a greater value in their shares. Additionally, stockholders who choose to sell at a later date will see increased gains due to the higher stock price. Therefore, the practice benefits stockholders who do not sell more than those who do sell.

Which of the Following Is True Concerning the Practice of Repurchasing