Gamma Industries has net income of $1,400,000, and it has 1,930,000 shares of common stock outstanding. The company's stock currently trades at $68 a share. Gamma is considering a plan in which it will use available cash to repurchase 15% of its shares in the open market at the current $68 stock price. The repurchase is expected to have no effect on net income or the company's P/E ratio. What will be its stock price following the stock repurchase? Do not round intermediate calculations. Round your answer to the nearest cent.
$
it uses cash to repurchase 15% of its shares in the open market
at the current $68 stock price. The repurchase is expected to have
no effect on net income or the company's P/E ratio.
So stock price following the stock reourchase is also
$68
verification:
Current value of shares = MPS*number of Shares
68*1930000
131240000
15% repurchased amount = 19686000
No. of share repurchased formula = Amount of repurchase/market
price per share
19686000/68
289500
Shares remaining after repurchase=
1930000-289500
1640500
VALUE of Firm after repurchase = (Value before repurchased - amount
of repurchased)
131240000-19686000
111554000
Value per share = 111554000/1640500=
68
Gamma Industries has net income of $1,400,000, and it has 1,930,000 shares of common stock outstanding....
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