Freeport-McMoRan Copper & Gold Inc., one of the world’s largest copper producers

Question

Freeport-McMoRan Copper & Gold Inc., one of the world’s largest copper producers, said yesterday that it would repurchase up to five million shares of its common stock in the open market and through private transactions. The company, based in Phoenix, said it recently completed a program announced last September to buy back 2.5 million shares. Freeport-McMoRan said the purchases were being made to enhance shareholders’ value. The company has about 70.7 million shares outstanding. Shares of Freeport-McMoRan fell to $53.50 on the New York Stock Exchange yesterday. Required: 1. Determine the amount and direction (increase or decrease) of the impact of the stock repurchase on the financial statements. (Enter your answers in whole dollars not in millions (i.e., 1,000,000 not 1.0).)

Assets?

Stockholder Eqiuty?

Explanation / Answer

Shares outstanding – 70,700,000

Share repurchases=5,000,000

Price of share in the market=$53.50

Cash paid towards shares buyback=5,000,000*$53.50=267,500,000

Decrease in shareholders equity=70,700,000-5,000,000=65,700,000

Decrease in asset, that is cash=267,500,000

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