A reason prompting a firm to purchase treasury stock is that management believes the stock is undervalued in the marketplace and therefore represents a good investment opportunity.

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This is a common reason for firms to purchase their own treasury stock. By buying back shares, the company can reduce the number of outstanding shares and increase the value of remaining shares for shareholders. If management believes the stock is undervalued, repurchasing shares can be a good investment opportunity for the company.

A Reason Prompting a Firm to Purchase Treasury Stock Is