A share repurchase is said to be equivalent to the payment of a cash dividend because each strategy:
A) causes share price to decline.
B) causes share price to stay the same.
C) creates the same tax liability for the investor.
D) leaves the firm with the same amount of assets.

Question

Quizplus · Accepted Answer

A share repurchase and a cash dividend both reduce the firm's assets by the same amount, as cash is used in both cases. However, they do not necessarily create the same tax liability or affect the share price in the same way.

A Share Repurchase Is Said to Be Equivalent to the Payment