1) Which of the following considerations should NOT be related to management's concerns when setting a stock repurchase policy?

A) Does a firm have enough financial reserves to meet the short-term obligations in periods when earnings are down or investment requirements are up?

B) Is the stock currently undervalued? Can the management add value to the company by initiating a stock repurchase?

C) Over the long term, how much does a company's level of earnings exceed its investment requirements? How certain is this level?

D) Can a firm quickly raise equity capital if necessary?

2) Which of the following statements about the relative advantages of stock repurchases over dividends is NOT true?

A) Open-market stock purchases allow management more flexibility because investors are less likely to react if the management cuts back or ends a stock repurchase as compared to cutting back on dividend payments.

B) Since most ongoing stock repurchase programs are as visible as dividend programs, they can be used effectively to send a positive signal about a firms prospects to investors.

C) Stock repurchases allow stockholders to choose whether or not to participate in the stock repurchase. This allows stockholders to have more control over their tax burden.

D) Historically, taxes on dividend payment have been higher than those on stock repurchases.