Question

Eisley's Inc has a market value of equity of $9,900. The firm has 600 shares of...

Eisley's Inc has a market value of equity of $9,900. The firm has 600 shares of stock outstanding and excess cash of $528. Assume the firm uses all of its excess cash for a stock repurchase. Which of the following would M&M say is the price per share be after the repurchase?

Group of answer choices

$17.80

$18.00

$16.50

$17.67

$15.90

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Homework Answers

Answer #1

Current Market Value of Equity =$9900

No of shares outstanding =600

Current Value per share = Current Market Value of Equity/No of shares outstanding

=$9900/600 shares

Current Value per share = $16.50

- Eisley's Inc has Excess cash = $528

Eisley's Inc will repurchase shares from Excess Cash.

No of shares repurchase = Excess Cash/Current Value per share

No of shares repurchase = $528/$16.5 =  32 shares

No of shares outstanding after repurchase = 600 shares - 32 shares = 568 shares

Total market value of equity after repurchase = $9900 - $528 = $9372

Price per share after repurchase = $9372/568 shares

Price per share after repurchase = $16.5 per share

Option 3

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