Effect of one-time share repurchase on the stock price

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Reference no: EM131816065

Natsam Corporation has $250 million of excess cash. The firm has no debt and 600 million shares outstanding with a current market price of $13 per share. Suppose the board decided to do a one-time share? repurchase, but you, as an investor, would have preferred to receive a dividend payment. How can you leave yourself in the same position as if the board had elected to make the dividend payment instead?

Which of the following is true regarding the effect of a one-time share repurchase on the stock price? (Select the best choice below.)

A. An open-market share repurchase decreases the stock price because the firm's assets declined by the amount of the purchases of the shares.

B. An open-market share repurchase has no effect on the stock price.

C. An open-market share repurchase increases the stock price due to the decrease in shares in the marketplace.

D. An open-market share repurchase has no effect on the stock price, but the stock price is not the same as the cum-dividend price if a dividend were paid instead.

To receive your dividend, the percentage of your shares you should sell is [ ] %. (Round to two decimal places.)

Reference no: EM131816065

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