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$.\text{'}$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?

To distribute excess funds to stockholders

To protect against a takeover attempt

To adjust the firm's capital structure

To acquire shares needed for employee options or compensation

Which of the following statements would be considered advantages of a stock repurchase? Check all that apply.

The interval between stock repurchases tends to be irregular, which means that investors cannot always count on cash inflows from repurchases.

The market generally perceives a stock repurchase as a sign that management believes that the firm's stock is undervalued.

Stock repurchases allow a firm to distribute earnings to investors without changing the amount of the regular cash dividend.