FIN 351 TEXT QUIZ CHAPTER 10

66 One reason a firm may repurchase its own shares is
A. Management views the firm's future prospects to be bright
B. To go public
C. To qualify for an exchange listing
D. To adhere to SEC requirements on number of shares outstanding
67. Once management announces that it will buy back one million shares over a given time period as
circumstances become appropriate
A. It is legally obligated to buy all one million shares back
B. It is not legally obligated to buy all one million shares back
C. It must buy back the number of shares that are equal to income in a given year (up to one million
shares)
D. It must buy back the number of shares that are equal to income minus common stock dividends in a
given year (up to one million shares)
68. A study by Ikenberry, Lakonishok and Vermaelen indicated what type of stock had the best performance
four years after announcement of a stock repurchase, what type was it?
A. Growth stocks
B. Convertible preferred stocks
C. Low yield stocks
D. Value oriented stocks
69. Why does a stock repurchase improve the aftertax position of stockholders over cash dividends?
A. The theoretical increase in value is taxed at the lower capital gains rate
B. Reduced shares outstanding increase earnings per share
C. Cash dividends are taxed as ordinary income
D. All of the above
70. What is market capitalization?
A. The total owner's equity in a firm
B. The total marketable assets of a firm
C. Shares outstanding multiplied by the market value of the stock
D. None of the above