The balance sheet for Levy Corp. is shown here in market value terms. There are

Question

The balance sheet for Levy Corp. is shown here in market value terms. There are 5,000 shares of stock outstanding.

.                                       Market Value Balance Sheet

Cash                            $ 44,300          Equity       $ 414,300

Fixed assets                  370,000

Total                              414,300          Total            414,300

Instead of a dividend of $1.60 per share, the company has announced a share repurchase of $8,000 worth of stock.

How many shares will be outstanding after the repurchase? (Do not round intermediate calculations and round your answer to 2 decimal places. (e.g., 32.16))

Current stock price            $ 82.86 CORRECT

Ignoring any tax effects, what will it sell for tomorrow? (Do not round intermediate calculations and round your final answer to 2 decimal places. (e.g., 32.16))

New stock price $ 82.86 INCORRECT

Ignoring any tax effects, what will the balance sheet look like after the dividends are paid? (Do not round intermediate calculations.)

                                            Market Value Balance Sheet

Cash                  $ 36,300 INCORRECT            Equity    $ 406,300 INCORRECT

Fixed assets        370,000 INCORRECT       

                             $406,300 INCORRECT       Total         $ 406,300 INCORRECT           

HELP PLEASE!!

Can you stick aroud to help if i have a question please? Thank you

Explanation / Answer

The answers provided are correct.

Due to repurchase, intrinsic value i.e., market value remains unchanged.

Hence new current stock price = $82.86

Repurchase of stock results in decrease in cash balance and decrease in equity a/c, hence the balances provided in balance sheet also appears to be correct

Related Questions

Navigate

• Browse (All)
• Browse T
• Subjects

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.