Question

Green Thumb Nursery has11,000 shares of stock outstanding at a market price of $18 a share....

Green Thumb Nursery has11,000 shares of stock outstanding at a market price of $18 a share. The current earnings per share are $1.47. The firm has total assets of $286,000 and total liabilities of $86,000. Next week, the firm will be repurchasing $36,000 worth of stock. Ignore taxes. What will be the earnings per share after the stock repurchase?

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Answer #1

Earnings per share after the stock repurchase = $1.797 (Approx.)

Explanation;

Number of shares outstanding after stock repurchase will be calculated as follow;

11000 – ($36000 / $18)

11000 – 2000

= 9000 shares

Earnings per share is given = $1.47

Number of share outstanding before stock repurchase = 11000

Hence, total earnings available for stockholders (11000 * $1.47) = $16170

Hence, earnings per share after the stock repurchase = $16170 / 9000

= $1.797 (Approx.)

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