Answered

Welcome to Westonci.ca, where you can find answers to all your questions from a community of experienced professionals. Discover detailed answers to your questions from a wide network of experts on our comprehensive Q&A platform. Our platform provides a seamless experience for finding reliable answers from a network of experienced professionals.

Assume you are the CFO of a company that has accumulated a significant amount of cash, well beyond its foreseeable needs. The company’s CEO has asked your opinion about using the cash to repurchase company shares or using the cash to distribute an extraordinary dividend to your shareholders. In a brief memo, explain to the CEO what the pros and cons of each of these are. You may assume your company is a fictitious one and assign to it whatever circumstances you like or you may assume your company is an actual existing corporation. Your memo should include at least two references to published works like books, articles, etc.

Sagot :

jepessoa

Answer:

I believe that the best action is to repurchase stocks.

Paying a large and unexpected dividend will yield an immediate return, but it will also decrease the stock's price. On the other hand, repurchasing stocks will result in lower outstanding stocks and the same cash flows. This will result in higher stock prices. Supposedly, upper management has the duty to increase the wealth of stockholders and that is achieved through higher stock prices.

Explanation:

We hope this was helpful. Please come back whenever you need more information or answers to your queries. Thank you for your visit. We're committed to providing you with the best information available. Return anytime for more. We're glad you chose Westonci.ca. Revisit us for updated answers from our knowledgeable team.