Final answer:
A corporation may repurchase its shares because management believes the stock is undervalued, anticipating capital gains for the company. This signal of confidence can have a positive impact on the stock's market value. The correct answer is option d.
Step-by-step explanation:
A corporation may repurchase its shares of stock for several reasons, but the most common reason is the belief that the market price of the stock is undervalued. This belief indicates that management feels the stock is worth more than its current trading price, suggesting a good investment for the company to buy back shares.
Investors typically expect to receive a rate of return on their investments which can be delivered through dividends or capital gains. A capital gain occurs when an investor buys a share of stock at a lower price and sells it at a higher price, such as buying a share at $45 and selling it at $60, resulting in a $15 gain. This capital gain represents an increase in the value of an asset.
While companies may also repurchase shares to manipulate stock prices or appear more financially stable, these practices can be controversial and are subject to regulatory scrutiny. A repurchase is often seen positively by the market as it can indicate that the company has strong future prospects and its management is confident in its current valuation.