Which of the following circumstances is likely to motivate a firm to repurchase some of its stock?
A) Management believes that the stock's market price is below its intrinsic value.
B) The firm has excess cash.
C) Institutional investors prefer stock repurchases to cash dividends.
D) All of the above.

Question

Quizplus · Accepted Answer

All of the given circumstances are likely to motivate a firm to repurchase some of its stock. When management believes that the stock's market price is below its intrinsic value, they see buying back shares as a good investment for the firm. If the firm has excess cash, then stock repurchases can be a way to utilize that cash to benefit shareholders. Institutional investors may also prefer stock repurchases as they can increase the value of their remaining shares.

Which of the Following Circumstances Is Likely to Motivate a Firm