Question #4
Reading: Reading 15 Analysis of Dividends and Share Repurchases
PDF File: Reading 15 Analysis of Dividends and Share Repurchases.pdf
Page: 2
Status: Unattempted
Question
Which of the following statements about a stock repurchase is least accurate?
Answer Choices:
A. A stock repurchase occurs when a large block of stock is removed from the marketplace
B. Disgruntled stockholders are forced to sell their shares, improving management's position
C. Management can distribute cash to shareholders at a favorable after-tax rate
Explanation
A repurchase gives stockholders a choice. They can sell or not sell. Stock repurchase is
also more tax-efficient as only those shareholders that choose to sell their shares would
potentially have a tax liability.