Enhancement of shareholder value through stock repurchase is achieved by
A) reducing the number of shares outstanding and thereby raising earnings per share.
B) sending a positive signal to investors in the marketplace that management believes that the stock is undervalued.
C) providing a temporary floor for the stock price, which may have been declining.
D) all of the above.

Question

Quizplus · Accepted Answer

Stock repurchase can lead to an increase in shareholder value through multiple mechanisms. By reducing the number of shares outstanding, earnings per share increase, making the stock more attractive to investors. Additionally, stock repurchases send a signal to the market that management believes the stock is undervalued, which can lead to increased demand and a higher stock price. Finally, repurchases can provide a temporary floor to the stock price, preventing it from declining further. All of these factors can contribute to increased shareholder value.

Enhancement of Shareholder Value Through Stock Repurchase Is Achieved by