Question

The market price of a company's stock is $5 per share with 50 million shares      outstanding....

The market price of a company's stock is $5 per share with 50 million shares

     outstanding. The company decides to use its cash reserves to undertake a $10 million

     share buyback. Just prior to the buyback, the company reports total assets of $650

     million and total liabilities of $450 million. The company's book value per share after

     the share buyback is closest to:

A. $3.96.

B. $4.17.

C. $3.80.

D. $5.15

Business   Finance   
0 0
Add a commentTranscribed image text
Next >

Homework Answers

Answer #1

we have given

Total Assets - $650 Million

Total Liabilities - $450 Million

So, Stock Holder Equity = Total Assets - Total Liabilities

= $650 Million - $450 Million

= $200 Million

Now, The Company wants to buy back shares worth $10 Million

Stockholder equity after buyback = Stock Holder equity before buyback - Amount of buyback

= $200 million - $10 Million

= $190 Millions

So, Number of shares of Buyback = Amount of Buyback / Price per share

= $10 Million / 5

= 2 Million shares

So, The Number of shares after buyback = 50 Millions - 2 Millions

= 48 Million shares

Book Value of share after buyback = Stockholder equity after buyback / Number of shares after buyback

= 190 Millions / 48 Millions

= $3.9583 or 3.96 (Rounded to near cent)

The correct answer is $3.96 (Option A)

0 0
Know the answer?
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Log In

Sign Up

Not the answer you're looking for?
Ask your own homework help question
Similar Questions
Green Thumb Nursery has 55,000 shares outstanding at a market price of $63.61 per share. The...
Green Thumb Nursery has 55,000 shares outstanding at a market price of $63.61 per share. The earnings per share are $3.61. The firm has total assets of $366,000 and total liabilities of $209,000. Today, the firm announced a share repurchase for $121,000 of its stock. What is the earnings per share after the repurchase? Multiple Choice $3.87 $3.74 $3.51 $3.61 $3.80
Masterson, Inc., has 5 million shares of common stock outstanding. The current share price is $65,...
Masterson, Inc., has 5 million shares of common stock outstanding. The current share price is $65, and the book value per share is $4. The company also has two bond issues outstanding. The first bond issue has a face value of $50 million, has a coupon rate of 5 percent, and sells for 90 percent of par. The second issue has a face value of $35 million, has a coupon rate of 4 percent, and sells for 102 percent of...
Dinklage Corp. has 8.1 million shares of common stock outstanding. The current share price is $47,...
Dinklage Corp. has 8.1 million shares of common stock outstanding. The current share price is $47, and the book value per share is $5. The company also has two bond issues outstanding. The first bond issue has a face value of $70 million, has a 7 percent coupon, and sells for 94 percent of par. The second issue has a face value of $54.27 million, has a 7 percent coupon, and sells for 98 percent of par. The first issue...
Dinklage Corp. has 9.1 million shares of common stock outstanding. The current share price is $51,...
Dinklage Corp. has 9.1 million shares of common stock outstanding. The current share price is $51, and the book value per share is $4. The company also has two bond issues outstanding. The first bond issue has a face value of $79 million, has a 7 percent coupon, and sells for 91 percent of par. The second issue has a face value of $64.61 million, has a 7 percent coupon, and sells for 95.1 percent of par. The first issue...
Growth​ Company's current share price is $ 19.95 and it is expected to pay a $...
Growth​ Company's current share price is $ 19.95 and it is expected to pay a $ 0.90 dividend per share next year. After​ that, the​ firm's dividends are expected to grow at a rate of 3.6 % per year. a. What is an estimate of Growth​ Company's cost of​ equity? b. Growth Company also has preferred stock outstanding that pays a $ 1.95 per share fixed dividend. If this stock is currently priced at $ 27.90​, what is Growth​ Company's...
Growth​ Company's current share price is $ 20.15 and it is expected to pay a $...
Growth​ Company's current share price is $ 20.15 and it is expected to pay a $ 1.30 dividend per share next year. After​ that, the​ firm's dividends are expected to grow at a rate of 4.5 % per year. a. What is an estimate of Growth​ Company's cost of​ equity? b. Growth Company also has preferred stock outstanding that pays a $ 2.00 per share fixed dividend. If this stock is currently priced at $ 27.85​, what is Growth​ Company's...
NLT has 2 million shares outstanding and the current share price is $12 per share. The...
NLT has 2 million shares outstanding and the current share price is $12 per share. The company announced to launch a rights offering where each share is given one right and shareholders can purchase one share at $10/share for every 4 rights. Assuming all shareholders will participate, the total equity value of NLT post rights issue is closest to Select one: a. $20m b. $23m c. $32m d. $24m e. $29m
Hero Manufacturing has 5 million shares of common stock outstanding. The current share price is $77...
Hero Manufacturing has 5 million shares of common stock outstanding. The current share price is $77 and the book value per share is $8. The company also has two bond issues outstanding, both with semiannual coupons. The first bond issue has a face value $60 million and a coupon of 6 percent and sells for 97 percent of par. The second issue has a face value of $30 million and a coupon of 7 percent and sells for 105 percent...
Dinklage Corp. has 10.1 million shares of common stock outstanding. The current share price is $53,...
Dinklage Corp. has 10.1 million shares of common stock outstanding. The current share price is $53, and the book value per share is $5. The company also has two bond issues outstanding. The first bond issue has a face value of $81 million, has a 7 percent coupon, and sells for 92 percent of par. The second issue has a face value of $56.56 million, has a 7 percent coupon, and sells for 96.2 percent of par. The first issue...
Dinklage Corp. has 8.1 million shares of common stock outstanding. The current share price is $57,...
Dinklage Corp. has 8.1 million shares of common stock outstanding. The current share price is $57, and the book value per share is $6. The company also has two bond issues outstanding. The first bond issue has a face value of $68 million, has a 9 percent coupon, and sells for 95 percent of par. The second issue has a face value of $55.08 million, has a 9 percent coupon, and sells for 99.1 percent of par. The first issue...
ADVERTISEMENT
Need Online Homework Help?

Get Answers For Free
Most questions answered within 1 hours.

Ask a Question
ADVERTISEMENT