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Ignoring possible tax effects and signaling costs, the total value of a firm's equity remains the same irrespective of how the firm distributes its residual
Ignoring possible tax effects and signaling costs, the total value of a firm's equity remains the same irrespective of how the firm distributes its residual earnings-dividends or stock repurchases. Each distribution method has certain advantages and disadvantages. Based on your understanding of dividends and stock repurchases, select the best terms to go with the statements. Management is likely to repurchase stock if it believes that the stock is ????; this sends positive signals to investors. Undervalued Overvalued Repurchases allow a firm to buy back as much stock as it wants, at whatever price it wants, without affecting shareholders. This statement is ???? True False Dividends provide signals about a firm's future prospects, whereas some investors might misinterpret why a firm is repurchasing stock. This statement is ???? True False Repurchases give managers an opportunity to make efficient use of excess free cash flow helping in ???? agency costs. Reducing Increasing
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