If you ignore taxes and costs,a stock repurchase will:
I.reduce the total assets of a firm.
II.decrease the earnings per share.
III.reduce the PE ratio more so than an equivalent stock dividend.
IV.reduce the total equity of a firm.
A)I and III only
B)I and IV only
C)II and IV only
D)I, III, and IV only
E)II, III, and IV only

Question

Quizplus · Accepted Answer

I and IV are correct because a stock repurchase reduces the company's cash (an asset), thus reducing total assets, and it also reduces shareholders' equity by the amount used to buy back the shares.

If You Ignore Taxes and Costs,a Stock Repurchase Will