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When companies buy back stock, they are allowed to reduce the book value of their equity by the market value of the stocks bought back.

When companies buy back stock, they are allowed to reduce the book value of their equity by the market value of the stocks bought back. When the market value of equity is well in excess of book value of equity, buying back stock will generally

A. increase the return on capital but not affect the economic value added

B.

increase the return on capital and increase the economic value added

C.

not affect the return on capital but increase the economic value added

D.

None of the above.

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