Completion of all three questions. Question 3 keep separately.
Q3-
How does Amazon’s stock buyback impact its
earnings per share and balance sheet?
In March 2022, Amazon’s board of directors authorized it to buy back up to $10 billion of
its stock. The stock buyback will take place over a multi-year period. Amazon may not
buy back the full $10 billion of its stock; the board’s authorization is simply the maximum
amount of stock that can be repurchased.
Questions
1. What are some reasons that Amazon may want to buy back its own stock?
2. Assume that Amazon repurchases $1 million of its stock. How will Amazon’s
balance sheet be impacted by this purchase?
3. Compare a stock buyback with a stock issue. Which transaction (stock buyback or
stock issue), if any, will cause stockholders’ equity to increase? To decrease?
4. Assume that a company has 1,000,000 shares authorized and 600,000 shares
issued. How many shares will it have outstanding if it has repurchased 150,000
shares?
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