Consider two potential transactions in Microsoft: (a) repurchasing 1 million shares at a market price of $50/share from outside investors using cash, and (b) issuing 1 million shares to employees when they redeem their stock options at strike/exercise price of $20/share (assume these 1 million shares are also worth $50/share at NASDAQ).

Is the following statement correct? and why?

"Existing common shareholders benefit from conducting both transactions at the same time because transaction (a) neutralizes the dilution effect of transaction (b)."

a) It is not correct because transaction A is in cash but transaction B is in shares.

b) Is not correct because transaction A has no effect on value per share.

c) It is correct because transaction A undoes the dilution of transaction B.

d) It is correct because the number of shares ends up being the same after both transactions.