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Basic Question 9 of 13
Which of the following would not be considered a disadvantage of a stock repurchase?
B. They may invite lawsuits from stockholders who had insufficient information about future prospects before selling.
C. The firm may pay too high a price for the repurchased stock.
D. They signal management's perception that the company's stock is currently undervalued.
A. They may not have the same positive effect on stock prices that a cash dividend would have.
B. They may invite lawsuits from stockholders who had insufficient information about future prospects before selling.
C. The firm may pay too high a price for the repurchased stock.
D. They signal management's perception that the company's stock is currently undervalued.
User Contributed Comments 4
| User | Comment |
|---|---|
| quynhnk79 | Why B is correct? (in a sense that it would be considered as disadv? ) Is it inviting lawsuit? Why it could be? |
| thekapila | it is a disadvantage if lawsuit is filed against corporation. |
| tichas | @quynhnk79, look out for questions with double negatives and in this case ,not be and disadvantage. |
| nzee | good example of tricky question for those who sleep during exams ! |
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Learning Outcome Statements
compare stable dividend with constant dividend payout ratio, and calculate the dividend under each policy;
describe broad trends in corporate payout policies;
CFA® 2025 Level II Curriculum, Volume 3, Module 16.