How nice would it be to live in a perfect world.we would have no problems and everyone would be happy. The companies that are foundationally built to generate wealth, must be able to utilize both debt and equity to generate the demand return rate and continue to add wealth/value to the companys financial structure. The firm has to make a decision on how to balance the payout of dividends (payments received as wealth is created) versus reinvestment of those funds into the company via share repurchase.

There are some tax advantages when a firm utilizes funds when opting for share repurchase. With the company repurchasing shares, it is adding debt to the capital structure therefore the debt is not taxed and increases the tax shelter for the company (Brigham & Ehrhardt, 2020). As a management team acting upon repurchasing stock would be placing stock as undervalued and using this method would in turn put money back into the shareholders' pockets (Banton, 2020). This is a way to show long-term investors excess cash being reinvested into the companys future.

Do you agree or disagree with this statement? Please explain why.