A firm has 20 million shares outstanding with a market price of $25 per share. T

Question

A firm has 20 million shares outstanding with a market price of $25 per share. The firm has $10 million in extra cash (short-term investments) that it plans to use in a stock repurchase; the firm has no other financial investments or any debt.

#1.) What is the firm's value of operations after the repurchase? Enter your answer in millions. For example, an answer of $1.2 million should be entered as 1.2, not 1,200,000. Round your answer to two decimal places.

#2) How many shares will remain after the repurchase? Round your answer to the nearest whole number.

Explanation / Answer

Vop = (n0*P) ? Extra cash = (20,000,000 x $25) ? $10,000,000 = $400,000,000.

$400 millians

So, no of shares

n = Vop / P = $400,000,000 / $25 = 8,000,000.

Related Questions

Navigate

• Browse (All)
• Browse A
• Subjects

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.