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 $1.60, the company has announced it is going to repurchase $46,400 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 29,000 shares of stock outstanding.

Explanation / Answer

1. If company purcahses stock worth of $ 46,400, the equity is decreased by $46,400

2. Shares will be remaining after the repurchase = Present outstanding shares - repurchased shares

    One share value = 635,970/29,000 = $21.93;

    Number of shares purchased for an amount of $46,400 = 46,400/21.93 = 2,116 shares

    No. of shares outstandig after repurchase = 29,000 - 2,116 = 26,884

   3. Equity after repurchase = $635,970 - $46400 = $589,570

      Price per share after repurchase = 589,570/26,884

      price per share                            = $21.93

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