The balance sheet for Chevelle Corp. is shown here in market value terms. There

Question

The balance sheet for Chevelle Corp. is shown here in market value terms. There are 6,000 shares of stock outstanding. Instead of a dividend of $1.50 per share, the company has announced a share repurchase of $9,000 worth of stock. How many shares will be outstanding after the repurchase? (Do not round intermediate calculations and round your final answer to 2 decimal places, (e.g., 32.16)) What will the price per share be after the repurchase? (Do not round intermediate calculations and round your final answer to 2 decimal places, (e.g., 32.16))

Explanation / Answer

1. Market price per share before repurchase = $505200 / 6000 = $84.20

No. of shares repurchased = $9000 / $84.20 = 106.888

No. of shares outstanding after repurchase = 6000 - 106.888 = 5893.11

2. Price per share after repurchase = Market value of equity / No. of shares after repurchase = 505200 / 5893.11 = $85.73

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