EJH Company has a market capitalization of $1.1 billion and 50 million shares ou

Question

EJH Company has a market capitalization of $1.1 billion and 50 million shares outstanding. It plans to distribute S85 million through an open market repurchase. Assuming perfect capital markets:

a. What will the price per share of EJH be right before the repurchase?

b. How many shares will be repurchased?

c. What will the price per share of EJH be right after the repurchase?

a. What will the price per share of EJH be right before the repurchase?

The price per share ofEJH right before the repurchase is $___. (Round to two decimal places.)

b. How many shares will be repurchased?

The number of shares to be repurchased is ___million. (Round to three decimal places.)

c. What will the price per share ofEJH be right after the repurchase?

The price per share ofEJH right after the repurchase will be $____. (Round to two decimal places.)

Explanation / Answer

a. The price per share before repurchase will be 1.1Billion/ 50 Million = 1.1*10^9/50*10^6 = $22/share

b. Since 85 Million is to be repurchased, the number of shares to be repurchased are 85*10^6/22 = 3,863,636.36 Shares. Hence the number shares to be repurchased will be 3,863,637 (Since we cannot have fractional shares)

c.Price after purchase will be (1.1*10^9 -85*10^6)/(50,000,000-3,863,637) = $22/Shares.

Hence the price/share is not affected by the repurchase

Related Questions

Navigate

• Browse (All)
• Browse E
• Subjects

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