(14-4) A firm has 20 million shares outstanding with a market price of $30 per s
ID: 2646114 • Letter: #
Question
(14-4) A firm has 20 million shares outstanding with a market price of $30 per share. The firm has $40 million in extra cash (short-term investments) that it plans to use in a stock repurchase; the firm has no other financial investments or any debt. What is the firm's value of operations after the repurchase? Enter your answer in millions. For example, an answer of $1.2 million should be entered as 1.2, not 1,200,000. Round your answer to two decimal places.
A. $_______ million
B.How many shares will remain after the repurchase? Round your answer to the nearest whole number.
Explanation / Answer
B)NUMBER OF TO BE REPURCHASE = $40 ML / 30
==13,33,333 SHARES
SHARES AFTER REPURCHASE = 20 ML - 13.3333 = 6.6667 ML SAHRES
A) VALUE OF FIRM"S OPERATIONS = 6.6667 ML SHARES * 30
==>$20 ML
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