10. Stock repurchases

10. Stock repurchases Aa Aa E There are a number of reasons why a firm might want to repurchase its own stock. Read the statement and then answer the corresponding question about the company's motivation for the stock repurchase: Smith and Martin Co.'s board of directors has decided to repurchase some of its stock on the open market because it wants to increase the company's debt-to-equity ratio. What is the company's motivation for the stock repurchase? O To protect against a takeover attempt To distribute excess funds to stockholders To adjust the firm's capital structure To acquire shares needed for employee options or compensation O Which of the following statements would be considered advantages of a stock repurchase? Check all that apply. O At times, the company will repurchase its stock at a price higher than the true value of the stock. Stock repurchases allow a firm to reduce the number of outstanding shares, increase the firm's share price, and make a potential takeover of the company more expensive. A stock repurchase can be used to minimize the dilution effect associated with employees exercising their stock options