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 26,000 shares of stock outstanding.

In lieu of a dividend of $1.40, the company has announced it is going to repurchase $36,400 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 26,000 shares of stock outstanding.

Explanation / Answer

Equity value will decrease by the share repurchase amount

=36400

Price per share = equity/number of shares = 680940/26000 = 26.19

Shares o/s after repurchase = shares o/s- repurchase amount/price per share

=26000-36400/26.19

=24610

Price after share repurchase = (equity-repurchase amount)/ Shares o/s after repurchase

                                     =(680940-36400)/24610

=26.19

Both are done using corporate profits, thus they are equivalent

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