Strategic Initiative Paper.

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

Repurchasing shares with a 40% debt to total capital ratio would increase shareholder value, however repurchasing shares with an 80% debt to total capital ratio would significantly decrease shareholder value and therefore would not be advisable. Increasing debt increases shareholder value to a certain point. As this proforma shows, the point of diminishing return is somewhere between 40% and 80%.

Although stock prices could increase when the company began to repurchase, they might fall down once the repurchase is finalized.

AutoZone can do a stock repurchasing program whitch means that the company believes in themselves and want to invest in themselves. AutoZone also might want to repurchase the stock back because they believe that the price for them is to low and they think the prices for them should be higher. When a company repurchase back some of their shares they want to improve their financial ration. They can improve earnings per share, return on assets, and return on equity, and their price to earnings ratio. Earnings per share increase because the number of shares outstanding is reduced. Return on assets also increases because cash is considered an asset and the cash was using to repurchase the stock. There is less outstanding equity for the firm and

This has caused the stock market to reward such behavior at the expense of future shareholders. When companies buy back shares they spend money that is gone for good, while at the same time increase earning per share. This makes each current shareholder own a little larger piece of the pie. However, the cash is now gone. Share buybacks are good when a company is maxing out capital spending on profitable investments but still have excess cash. Currently dividend and buybacks for the year are over $900 billion. This has directly contributed to such anemic economic expansion.

So why do corporations buyback stock, and how can buying them impact net earnings, earnings per share, shares outstanding and stock price? Well there are a couple of reasons for why a corporation would buyback their stock. These reasons being ownership consolidation, undervaluation, and boosting financial ratios (Investopedia, 2017). Now when it comes to ownership consolidation, it can help a corporation buyback their stock by paying off the investors and reducing the total cost of capital of as well (Investopedia, 2017). As for undervaluation, it can also help a corporation buyback their stock by taking advantage of the stock being undervalued. If the stock is undervalued, a corporation could go in and buyback some of the stock it purchased

As we have seen in appendix ---, repurchasing some of the stocks on a mix of cash and debt will have great benefit for both the company and the shareholders. it allows the company to take advantage of the tax shield and increases its EPS and ROES. There might be an even better

Growing businesses face many risks and uncertainties, and Microsoft is not the exception. With such intense competition, Microsoft continues to innovate to maintain current. Along with competition, Microsoft face geographical and product challenges. Altering their products to meet government regulations only reduces attractiveness to their products whole increasing production cost. Almost everything is a give and take. Constant risks need to be taken with hope that the outcome drives sales and customer satisfaction. Microsoft takes great

The potential disadvantage to the repurchasing of stock is that Dubinksi’s timing could be off for the repurchase of stock as their stock price was not far off its all time high. Although this can be seen as a disadvantage, it really is not because this all time high stock price really is not that high compared to its competitors performances. So rather than this historically high company stock price being a disadvantage to repurchase of stock, it is not because looking at their history they are growing, so this is the time to repurchase the stock to encompass greater future earning.

Microsoft’s primary operations has been developing and manufacturing of the software products. As a company, it has shown a very stable growth in terms of revenues and profits, thus enabling better than industry share price increase over more than a decade (1986-1999). With respect to the primary operation of software development and the task to financial reporting the two areas that were required to be established were –

Another option Linear Technology has to exercise its excess cash balance, they can repurchase shares to increase the value of the firm. This repurchase option is beneficial to the company and shareholders because in an open market share repurchase has no effect on the stock price. In addition, by repurchasing shares the firm’s earnings and earnings per share will increase. As shown in Exhibit B, by calculating the total numbers of shares repurchased (total cash balance/price per share) and subtracting it from the number of shares outstanding will give us the number of shares left outstanding after the repurchase to be 261,703,052. Exhibit B shows how this decrease in the number of shares drove up the earnings per share value by $0.10 from $0.55 to $0.65. When the company repurchases shares instead of paying out in special dividends, the firm’s value will increase and it also allows the firm to retain its cash reserves within the company.

In recent history, leading companies have adopted a regular buyback strategy in order to return all excess cash to shareholders. By definition, stock repurchasing allows companies to reinvest in themselve by reducing the number of outstanding shares on the market. Typically, buybacks are carried out on the open market, similarly to how investors purchase stocks. While there has been a clear shift in wealth distribution from dividends to stock repurchasing, this doesn’t mean a company cannot pursue both. Apple has a robust capital return

1. Hole Foods Donuts, Ltd. has generated profits of $2 per share for many years and has consistently paid 100% of those profits to shareholders via a dividend. Investors do not expect Hole Foods Donuts to grow in the future. The company has 200,000 shares of stock outstanding worth $20 per share. Suppose the firm decides to eliminate its dividend and instead use the money to repurchase shares.

The recent attack on September 11, 2001 has caused the market to see some low results. Since the stock price has fallen from $30 to $22.15, this would be a good opportunity for EASI to repurchase some stock to help increase the value to the shareholders. Repurchasing some stock at this point will signal to shareholders that management feels strongly about the restructuring of the company. This, also, will give the shareholders the confidence to remain with the company.

On the other hand, repurchase of stock can adjust shareholder distribution. If shareholders consist of most individual investors, they may require more dividends or other forms of profit sharing. Firm can repurchase stocks from such