A company has positive free cash flow and is considering whether to use the entire amount of
Question:
A company has positive free cash flow and is considering whether to use the entire amount of that free cash flow to pay a special cash dividend or to repurchase shares at the prevailing market price. Shareholders’ wealth under the two options will be equivalent unless the:
A. company’s book value per share is less than the prevailing market price.
B. company’s book value per share is greater than the prevailing market price.
C. tax consequences and/or information content for each alternative is different.
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The correct answer is B companys book value per share is greater than the pr...View the full answer
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Related Book For 
Corporate Finance A Practical Approach
ISBN: 9781118217290
2nd Edition
Authors: Michelle R Clayman, Martin S Fridson, George H Troughton, Matthew Scanlan
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