PDF F3 Study Guide

The cash balance will decrease by 75% and EPS will decrease by 25%.

The cash balance will decrease by 75% and EPS will increase by 25%.

The cash balance will decrease by 20% and the EPS will decrease by 25%.

The cash balance will decrease by 20% and the EPS will increase by 25%.

The payment of a special dividend could raise shareholders' expectations of similar distributions in the future, unlike a share repurchase.

The share repurchase could send a negative signal to shareholders as it could be interpreted as a failure of management to find suitable investment opportunities.

Determination of the repurchase price will be easy as shareholders will insist on receiving the open market price.

Different tax regimes could result in shareholders having a preference for a share repurchase due to the often more preferential tax treatment of capital gains.

The share repurchase, if approved by the shareholders, will be binding on all of the company's shareholders.

Investing in a 2 year bond returning 5% each year.

Investing in the local money market at 4% each year.

Maintaining the cash in a current account.

Paying the surplus cash as a dividend at the earliest opportunity.

Raises finance to fund new projects.

Changes the ownership structure of the core entity by introducing new shareholders. 

Allows investors to identify the true value of the demerged business.

Increases the risk of a takeover bid for the core entity.