A firm has a market value equal to its book value. Currently, the firm has exces

Question

A firm has a market value equal to its book value. Currently, the firm has excess cash of $1,400 and other assets of $4,600. Equity is worth $6,000. The firm has 750 shares of stock outstanding and net income of $950. The firm has decided to spend all of its excess cash on a share repurchase program. How many shares of stock will be outstanding after the stock repurchase is completed?

a. 758 shares

b. 591 shares

c. 583 shares

d. 408 shares

e. 575 shares

A firm has a market value equal to its book value. Currently, the firm has excess cash of $1,400 and other assets of $4,600. Equity is worth $6,000. The firm has 750 shares of stock outstanding and net income of $950. The firm has decided to spend all of its excess cash on a share repurchase program. How many shares of stock will be outstanding after the stock repurchase is completed?

a. 758 shares

b. 591 shares

c. 583 shares

d. 408 shares

e. 575 shares

Explanation / Answer

Ans

Detail Detail Amount Market Value/Book Value Share 6,000.00 No of Shares Outstanding      750.00 Market Price Per Share           8.00 Excess Cash Available 1,400.00 No of Shares available for Buy bck 1400/8      175.00 No of Shares Outstanding after buyback      575.00

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