Corporate Finance (4th Edition) (Pearson Series in Finance) - Standalone book
Corporate Finance (4th Edition) (Pearson Series in Finance) - Standalone book
4th Edition
ISBN: 9780134083278
Author: Jonathan Berk, Peter DeMarzo
Publisher: PEARSON
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Chapter 17.2, Problem 1CC
Summary Introduction

To discuss: Whether the price that rises under the repurchase of firm’s own shares, because of a decrease in the supply of outstanding shares is true or false.

Introduction:

Share repurchase is an alternative method used to pay the cash to the company’s investors by the way of buy back of shares. When a company purchases its own shares, which remains outstanding, it is known as stock repurchases.

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Students have asked these similar questions
5) What is a share buyback?A) An opportunity for the company to increase dividends without sending a signal that leads to a fall in the share priceB) An opportunity for shareholders to receive additional shares in proportion to their existing holding instead of the normal cash dividendC) A method by which the company can raise the level of borrowings on its balance sheetD) A mechanism by which the company buys a proportion of its own shares from investors
When additional shares of stock are issued, the earnings per share decreases (assuming no change in total earnings). Please explain how this occurs and what the impact on a firm’s decision to raise capital by equity, as oppose to debt.
The price of the new share after dividends are paid is showing as incorrect?

Chapter 17 Solutions

Corporate Finance (4th Edition) (Pearson Series in Finance) - Standalone book

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