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The balance sheet for Sinking Ship Corp. is shown here in market value terms. There are 5,000 shares of stock outstanding. |
| Market Value Balance Sheet | ||||||
| Cash | $ | 44,800 | Equity | $ | 464,800 | |
| Fixed assets | 420,000 | |||||
| Total | $ | 464,800 | Total | $ | 464,800 | |
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Instead of a dividend of $1.70 per share, the company has announced a share repurchase of $8,500 worth of stock. |
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How many shares will be outstanding after the repurchase? What will the price per share be after the repurchase? |
a)Market value per share = Total market value of equity /number of shares before repurchase
= 464800/5000
= $ 92.96 per share
Number of shares repurchased =8500/92.96= 91.44 shares (rounded to 91)
Shares after repurchase = 5000-91.44 = 4908.56 shares (rounded to 4909)
b)Price after repurchase :Market value after repurchase /shares after repurchase
= 456300/ 4908.56
= $ 92.96 per share
**Market value after repurchase :464800-8500=456300
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