Stock repurchases

Companies with excess cash often employ share repurchase plans in place of or along with cash dividends. Share repurchase plans can help investors

liquidate their holdings by selling their stock to the issuing company and earning from capital gains.

Consider the case of St$.$ Sebastian Company:

St$.$ Sebastian Company expects to earn $$5,100,000$ this year. The company currently has $910,000$ shares outstanding, and the shares have a per$-$

share market price of $$21.$ Assuming that St$.$ Sebastian's price$-$to$-$earnings $(\frac{P}{E})$ ratio remains constant and its earnings are unaffected by a share

repurchase transaction, then the company's expected market price per share$-$if it repurchases $90,000$ shares at the current market price$-$should be

Which of these factors are considered an advantage of a stock repurchase? Check all that apply.

The price of the firm's stock might benefit more from cash dividends than from a repurchase.

Stockholders who sell their stock back to the company might claim that they were not made fully aware of all implications of the

repurchase.

A repurchase can remove a large block of stock that is overhanging the market and keeping the per$-$share price depressed.