What happens to a shareholder's capital return when share repurchases occur?

When a company engages in share repurchases, it effectively reduces the number of outstanding shares in the market. This reduction can lead to an increase in the share price as earnings and cash flow are now distributed over fewer shares, boosting metrics like earnings per share (EPS) and return on equity (ROE). Consequently, a shareholder's capital return increases because, with fewer shares, the remaining shareholders retain a larger proportional claim on the company’s assets and future earnings.

This increase in capital return reflects a positive outcome for the shareholders who remain invested after the repurchase. They benefit from an enhanced share price that can lead to capital appreciation. Furthermore, the share repurchases can signal to the market that the company believes its shares are undervalued, potentially instilling greater confidence among investors, which can drive the stock price even higher.

In contrast, the other choices do not account for the fundamental dynamics of share repurchase impacts on outstanding equity and shareholder value.