Identify three reasons why a firm might buy back its own common ...

[kfurse]

Identify three reasons why a firm might buy back its own common stock shares.
 
  What will be an ideal response?

Question 2

You want to have 55,230 at the end of seven years. How much do you have to invest today to accumulate that total if you can earn 14 compounded annually?
 
  A) 22,071.97
  B) 19,361.38
  C) 20,763.00
  D) 22,092.00
  E) 22,074.34

[Toya9913]

Answer to Question 1

A stock repurchase (stock buyback) occurs when a firm repurchases its own stock. This results in a reduction in the
number of shares outstanding. Several reasons have been given for stock repurchases. The benefits include:
 A means for providing an internal investment opportunity
 An approach for modifying the firm's capital structure
 A favorable impact on earnings per share
 The elimination of a minority ownership group of stockholders
 A minimization of the dilution in earnings per share associated with mergers
 A reduction in the firm's costs associated with servicing small stockholders
 A potential tax advantage of a stock repurchase, as opposed to a cash dividend, from the shareholders' perspective.

Answer to Question 2

A