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Question

Which of the following would not be a good reason for a company to repurchase shares of its own stock?

A Management believes its stock is overvalued Correct Answer Incorrect Answer
B Management believes a stable cash dividend is in the best interest of shareholders Correct Answer Incorrect Answer
C Management wants to increase the amount of leverage in its capital structure Correct Answer Incorrect Answer
D None of the above Correct Answer Incorrect Answer
E All of the above Correct Answer Incorrect Answer

Solution

Repurchase or buy-back of shares is when the company buys its own shares from the public. Management would repurchase shares of its own stock if it believed that shares were undervalued, not overvalued.

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