Advantage of a stock repurchase

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Stock Repurchase

Gadget Manufacturing expects to earn 5,300,000 this year. The company currently has 790,000 shares outstanding and the shares have a per-share market price of 21 dollars. Assuming the PE ratio remains constant and its earnings are unaffected by a share repurchase transaction, then the company's expected market price per share if it repurchases 90,000 shares at the current market price should be:

A) 23.69

B) 28.43

C) 24.87

D) 27.24

Which of these factors are considered an advantage of a stock repurchase? Check all that apply and are true advantages

  • T/F The firm might pay too high a price for the repurchased stock
  • T/F When a firm distributes cash by repurchasing stock, stockholders have the option to either sell or not sell stock
  • T/F Stockholders who sell their stock back to the company might claim they were not fully aware of all implications of the repurchase
  • Any and all help is appreciated! Thank you for your help!

Reference no: EM132204048

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