Essay On Buy Back Of Share

Another option is the issuing of preferred stock, the company’s common stock is already overvalued in the market; therefore, sourcing additional capital through common stock might result to lower proceeds.

This signals that the excess cash was not highly utilized in the past although it already paid out dividends to its shareholders in 1996. This excess cash can be used for future projects and investments of the combined firm after acquisition.

In the open market share repurchase, the firm may or may not declare the repurchase. Depending on the market condition and the firm’s position in the industry, the firm can decide when and how many

The board decided that the company should be judged on its ability to make a profit, gain market share, provide positive ROA and make money for our shareholders with an increasing stock price. Our target was a stock price of $38

control over the company. Also, as we discussed in the cash option, share price will

* b.  Further allocation of amounts allocated to repurchased shares to various components of stockholder equity upon formal or constructive retirement.

“Given the choice, individual shareholders of a corporation prefer to receive their return on investment by way of dividends, rather than from the sale of shares at a profit.” Is this statement true? Explain.

The repurchase program increases the shareholder’s value. This is because of a rise in the price of the shares of the original shareholders.

2. Companies buy back shares on the open market over an extended period of time.

When a company decides to pay dividends, it has to be careful on how much it will be given to the shareholders. It is of no use to pay shareholders dividends

Since firms incur the re-purchase option by offering $20 cash for each stock bought back, the number of outstanding shares will be reduced. The Earnings per share will increase leading to an increased stock price.

Referring to Vice President of Finance, he want to pursue the current approach because they are in profitable based on contribution margin by 35 percent. The company just needs to monitor their margin in control their cost well.

This question is designed to focus the class on the share repurchase program as a critical use of funds for 2006. The primary advantage of share repurchases using dividends is that management can turn share repurchases off and on as allowed by cash flow. The other projected uses of funds, however, are largely driven by business issues that are not as flexible for management. Students should notice that

Dividend Policy | -Pay out dividend to shareholders in profitable period | -100% plowback to reinvest in the business |

* The value of the stock may see an upward trend thus increasing the initial investor’s financial wealth