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 29,000 shares of stock outstanding.

In lieu of a dividend of $0.70, the company has announced it is going to repurchase $20,300 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 29,000 shares of stock outstanding.

Explanation / Answer

Solution : Equity (A) = $659,750 No of share (B) = 29,000 Repurchase equity $20,300 Market price = A/B = $659750 / 29000 = 22.75 [1] It will reduce shareholders’ equity by $20300 [2] No of share to be repurchased = Repurchase equity / Market price = 20300/ 22.75 = 892 Shares approx No of share oustanding 29000 - 892 28108 shares [3] price per share be after the repurchase equity after repurhcase / Outstanding shares (659750 - 20300) / 28108 22.75 Approx [4] Yes, the share repurchase effectively the same as a cash dividend.

Related Questions

Navigate

• Browse (All)
• Browse T
• Subjects

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