Question

During the last year, My Town Grocers repurchased 500 shares of stock at $13 a share and paid dividends in the amount of $1,500. No shares were issued. What was the cash flow to stockholders for the year?

1)

$1,500

2)

$5,000

3)

$6,500

4)

$8,000

Answer 1

4)

$8,000

Working:

Cash flow to stockholders means cash given to stockholders.

Cash given to stockholders due to repurchase of stock

$       6,500

Cash given to stockholders in the form of Dividend

$       1,500

Cash flow to stockholders

$       8,000

Working:

Cash given to stockholders due to repurchase of stock

=

Number of shares repurchased x Repurchase Price

=

500

x

$          13

=

$    6,500