The balance sheet for Throwing Copper, Inc., is shown here in market value terms
ID: 2800170 • Letter: T
Question
The balance sheet for Throwing Copper, Inc., is shown here in market value terms. There are 30,000 shares of stock outstanding.
The compay has announced it is going to repurchase $51,000 worth of stock instead of paying a dividend of $1.70.
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 $ ______
Explanation / Answer
Answer 1 Repurchase will reduce the equity of the firm since cash will be used to purchased equity
Answer 2 This repurchase will reduce equity by $51,000
Answer 3
Price per share=
963600/30000
Price per share=
32.12
Number of share repurchased=
51000/32.12
Number of share repurchased=
1588
Answer 4
New share
outstanding=
Old issue-repurchase share
New share outstanding=
30000-1588
New share outstanding=
28412
Answer 5
New share price= New Equity/New share outstanding
New share price=
963600-51000/28412
New share price=
32.12
Price per share=
963600/30000
Price per share=
32.12
Number of share repurchased=
51000/32.12
Number of share repurchased=
1588
Answer 4
New share
outstanding=
Old issue-repurchase share
New share outstanding=
30000-1588
New share outstanding=
28412
Answer 5
New share price= New Equity/New share outstanding
New share price=
963600-51000/28412
New share price=
32.12
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