Question

use chart A to answer b,c

a. Using the information below, determine the intrinsic per share price of Pratt Hiking Equipment Company's equity. Write the value per share in the response box. Value of operations $2,100,000 Short-term investments before repurchase . $ 250,000 Debt $ 700,000 Preferred stock $ 150,000 Number of shares outstanding 30,000 b. Now suppose the company plans to liquidate and distribute $130,000 in short-term investments in the form of dividends to shareholders. What is the intrinsic per share stock price? What is the dividend per share? Write these values in the response box. C. Suppose instead the company makes the $130,000 distribution in the form of a stock repurchase. How many shares did the company repurchase? What is the intrinsic per share stock price after the repurchase? Write these answers in the response box.

Answer 1

Value of operation Short Term investtments before repurchase Debt preferred stock No. of share $ 2,100,000 $ 250,000 $ 700,000 $ 150,000 30,000

Value of operation $ 2,100,000 Add: Short Term investtments $ 250,000 Less: Debt $ -700,000 Less: preferred stock $ 150,000 IVO $ 1,500,000 No. of share 30,000 Value per share 50

Value of operation $ 2,100,000 Add: Short Term investtments $ 120,000 Less: Debt $ -700,000 Less: preferred stock $ -150,000 IVO $ 1,370,000 No. of share 30,000 Value per share 45.67 $ Available for distribution No. of share Divident per share 130,000 30,000 4.33

Available for repurchase Repurchase price NO. of share repurchased Balance No. of share New IVO New Value per share $ 130,000 45.67 2,847 27,153 $ 1,370,000 50.45

Note:- if You have any doubt about the solution then please let me know through the comment box.