Identify three reasons why a firm might buy back its own common stock shares

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A stock repurchase (stock buyback) occurs when a firm repurchases its own stock. This results in a reduction in the
number of shares outstanding. Several reasons have been given for stock repurchases. The benefits include:
• A means for providing an internal investment opportunity
• An approach for modifying the firm's capital structure
• A favorable impact on earnings per share
• The elimination of a minority ownership group of stockholders
• A minimization of the dilution in earnings per share associated with mergers
• A reduction in the firm's costs associated with servicing small stockholders
• A potential tax advantage of a stock repurchase, as opposed to a cash dividend, from the shareholders' perspective.

Business

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