Question

The balance sheet for Sinking Ship Corp. is shown here in market value terms. There are 6,000 shares of stock outstanding, Market Value Balance Sheet $ 45,500 Equity 490,000 Cash Fixed assets $535,500 Total $535,500 Total 535,500 Instead of a dividend of $1.80 per share, the company has announced a share repurchase of $10,800 worth of stock. a. 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.) b. 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.) a. Shares outstanding b. New stock price

Answer 1

Share price = $535,500/6000 = $89.25

No. Of shares repurchased = $10,800/$89.25 =121.008=121

a) shares outstanding after repurchase =6000-121= 5879

b) share price after repurchase / new share price = ($535,500 - $10,800) / 5879 = $89.25