The balance sheet for Levy Corp. is shown here in market value terms. There are

Question

The balance sheet for Levy Corp. is shown here in market value terms.

There are 10,000 shares of stock outstanding.   

Market Value Balance Sheet   

Cash $ 45,400   

Fixed assets 480,000     

Total $ 525,400   

Instead of a dividend of $1.70 per share, the company has announced a share repurchase of $17,000 worth of stock.

How many shares will be outstanding after the repurchase? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)      

Shares outstanding      

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

New stock price $   

Explanation / Answer

1) Value of equity = Market value of assets = $    525,400 Number of shares outstanding 10000 Price or value per share = 525400/10000 = $         52.54 Number of shares repurchased = 17000/52.54 = 323.563 Shares outstanding after repurchase = 10000-32.563 = 9676.44 Answer 2) Total market value of assets = 525400-17000 = $    508,400 New stock price (after repurchase) = 508400/(10000-323.563) = $         52.54 Answer

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