Question

A company with a share price of $59 has shares outstanding of 295,000. The company elects...

A company with a share price of $59 has shares outstanding of 295,000. The company elects to distribute $2 million via a share repurchase. After the repurchase, what will be the number of shares outstanding?

The answer is 261102.0 but i am not sure how...

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Answer #1

The per share price is $59.
The company elects to distribute $2 million via a share repurchase. This amount for share repurchase= $2*1000000=$2000000
Number of shares the company will be able to repurchase=Amount available for repurchase/Per share price
=$2000000/$59=33898.30508 or 33898 (Rounded to nearest whole number because shares are only purchased in whole numbers)
Currently, number of shares outstanding=295,000.
After repurchase, the number of shares outstanding will be=Number of shares available initially-Number of shares repurchased
=295000-33898=261102

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