The balance sheet for Pie Crust, Inc., is shown here in market value terms. Ther

Question

The balance sheet for Pie Crust, Inc., is shown here in market value terms. There are 25,000 shares of stock outstanding.

In lieu of a dividend of $1.30, the company has announced it is going to repurchase $32,500 worth of stock instead of paying a dividend.

How many shares will be outstanding after the repurchase? (Do not round intermediate calculations.Round your answer to the nearest whole number (e.g., 32).)

What will the price per share be after the repurchase? (Do not round intermediate calculations. Round your answer to 2 decimal places (e.g., 32.16).)

The balance sheet for Pie Crust, Inc., is shown here in market value terms. There are 25,000 shares of stock outstanding.

Explanation / Answer

1.   After repurchase of Stock, Shareholders equity is decreased by $ 32, 500

2. After repurchase of Stock worth $ 32,500, Number of shares outstanding will be 328 (i.e Per share value = Total Equity Stock $ 696,750/Number of shares 25,000 = $ 2787. After repurchase of Stock worth $ 32,500, remaining equity will be $ 696,750 less $ 32,500 = $ 664,250. Hence, oustanding shares after repurchase is $ 664,250/$ 2787 = 328)

3. After repurchase the share price will be $ 2787 only ( per share value do not change due to repurchase)

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