A firm has $300 million of assets that includes $60 million of cash and 8 million shares outstanding. If the firm uses $30 million of its cash to repurchase shares, what is the new price per share?

Question

Quizplus · Accepted Answer

After the repurchase, the firm's assets will be $270 million ($300 million - $30 million). The number of shares outstanding will be reduced by the number of shares repurchased, which is $30 million / $37.50 = 0.8 million shares. Therefore, the new number of shares outstanding is 8 million - 0.8 million = 7.2 million shares. The new price per share is $270 million / 7.2 million shares = $37.50.

A Firm Has $300 Million of Assets That Includes $60