The business section of The New York Times recently contained the following article: Freeport-McMoRan Copper & Gold

Question:

The business section of The New York Times recently contained the following article:

Freeport-McMoRan Copper & Gold Inc., one of the world’s largest copper producers, said yesterday that it would repurchase up to five million shares of its common stock in the open market and through private transactions. The company, based in Phoenix, said it recently completed a program announced last September to buy back 2.5 million shares. Freeport-McMoRan said the purchases were being made to enhance shareholders’ value. The company has about 70.7 million shares outstanding.

Shares of Freeport-McMoRan fell to $53.50 on the New York Stock Exchange yesterday.

Required:

1. Determine the impact of the stock repurchase on the financial statements.

2. Why do you think the board decided to repurchase the stock?

3. What impact will this purchase have on the company’s future dividend obligations?

Common Stock
Common stock is an equity component that represents the worth of stock owned by the shareholders of the company. The common stock represents the par value of the shares outstanding at a balance sheet date. Public companies can trade their stocks on... Dividend
A dividend is a distribution of a portion of company’s earnings, decided and managed by the company’s board of directors, and paid to the shareholders. Dividends are given on the shares. It is a token reward paid to the shareholders for their...