Ignoring possible tax effects and signaling costs, the total value of a firm’s equity remains the same irrespective of how the firm distributes its residual earnings—dividends or stock repurchases. Each distribution method has certain advantages and disadvantages. Based on your understanding of dividends and stock repurchases, select the best terms to go with the statements. Excess cash or a desire to recapitalize usually leads management to Dividends provide signals about a firm’s future prospects, whereas some investors might misinterpret why a firm is repurchasing stock. True False Repurchases allow investors who need cash to convert their investment in the company into . True or False: Repurchases are more dependable than dividends because the investor wealth does not decrease after a repurchase, whereas the stock price decreases when dividends are distributed. True False