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Question: Suppose a firm has 800,000 shares of stock currently outstanding. Each share currently has a true value of $20. Suppose the firm uses excess internal cash to repurchase 200,000 shares of stock at the following prices: $25, $20, and $15. What will be the effect of each of these alternative repurchase prices on the long-run market price of the shares after the repurchase assuming that in the long-run the market price for the stock will reflect the stock's true value? (Ignore issues such as taxation and transactions costs)

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Accounting Basics, Accounting

Category:- Accounting Basics
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