Is a stock buyback in the best interests of the shareholders? It is not uncommon for boards of directors to authorize the buyback of shares of outstanding stock in a company. Oftentimes the justification for this action is that the stock is undervalued. Taking the position suggests that the board believes it knows better than Wall Street what the value of a share of the firm’s stock is.When this situation occurs, buying back stock increases shareholders’

wealth. Others take a more cynical view, suggesting that buying back a firm’s stock is simply a way of driving the stock price up without actually improving the company’s performance. Those taking this perspective believe that the major results of stock repurchases are placated shareholders and the protection of ineffective top-level managers.

Presented below are some stock buyback plans that were announced within a few days of each other in 2005:

• Intel (INTC) announced it was expanding its buyback to a total of $25 billion worth of stock.

• Target (TGT) increased its buyback to $2 billion worth of shares.

• Whole Foods (WFMI) said it would buy back $200 million of its stock.

Use the Internet to conduct a historical search on each of these intended stock repurchasing plans. Using the information you find and the materials in the chapter, prepare answers to the following questions and be prepared to defend the position indicated by your answers to your classmates.