Stock Repurchase Company YUM has 15 million shares outstanding with a market pri

Question

Stock Repurchase

Company YUM has 15 million shares outstanding with a market price of $20/per share. The Company YUM has $25million in extra cash (short-term investments) that it plans to use in a stock repurchase. Company YUM has no other financial investments or any debt.

A) What is the Company YUM's value of operations after the repurchase? Enter your answer in millions. Round your answer to two decimal places.

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

Explanation / Answer

A) Value of operations after re-purchase = (15 x 20) - 25 = $275 million

B) Number of shares which can be re-purchase = 25,000,000 / 20 = 1,250,000 shares
Shares remain after re-purchase = 15,000,000 - 1,250,000 = 13,750,000 shares

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