From the firm's point of view, a major advantage of share repurchases over cash dividends is
A)a commitment to maintain or increase repurchases every year.
B)a stronger signal about the firm's financial strength.
C)that they restrain agency costs.
D)that the repurchases imply no commitment to pay the same amount or more every year.

Question

Quizplus · Accepted Answer

Share repurchases do not entail any commitment to pay the same amount or more every year, unlike cash dividends. This offers more flexibility for the firm to adjust their capital allocation strategy based on their changing financial and business requirements. Additionally, repurchasing shares can also be an effective way to indicate that the firm believes its shares are undervalued and that it's an attractive investment opportunity for potential shareholders.

From the Firm's Point of View, a Major Advantage of Share