Use the following two statements to answer this question:
I.Managers only repurchase shares to take advantage of their underpricing
II.Share repurchases are exactly the same as cash dividends in the real world.
A)I and II are correct.
B)I and II are incorrect.
C)I is incorrect and II is correct.
D)I is correct and II is incorrect.

Question

Quizplus · Accepted Answer

I is incorrect because managers may repurchase shares for various reasons, not just because they are underpriced. II is incorrect because share repurchases and cash dividends have different tax implications and effects on shareholder wealth in the real world.

Use the Following Two Statements to Answer This Question