The balance sheet for Throwing Copper, Inc., is shown here in market value terms

Question

The balance sheet for Throwing Copper, Inc., is shown here in market value terms. There are 25,000 shares of stock outstanding.

The compay has announced it is going to repurchase $22,500 worth of stock instead of paying a dividend of $.90.

What effect will this transaction have on the equity of the firm? (Input the answer as positive value. Do not round intermediate calculations and round your answer to the nearest whole number, e.g., 32.)

Will (Click to select)increasereduce shareholders’ equity by $

How many shares will be outstanding after the repurchase? (Do not round intermediate calculations and round your answer to the nearest whole number, e.g., 32.)

New shares outstanding             

What will the price per share be after the repurchase? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)

Share price            $

Market Value Balance Sheet Cash $ 175,000 Fixed assets 570,000 Equity $ 745,000 Total $ 745,000 Total $ 745,000

Explanation / Answer

1)Equity will decrease by amount of repurchase =$ 22500

2)Market price =745000/25000=$29.8

shares repurchased = Amount for repurchase/market price per share

                 = 22500/29.8

               =755 shares approx

            

Shares outstanding after repurchase = Total shares issued -shares

            = 25000-755

             = 24245 shares

3)new share price =[745000-22500]/24245

             = $ per 29.80share

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