A firm has $300 million of assets that includes $50 million of cash and 10 million shares outstanding.If the firm uses $30 million of its cash to repurchase shares,what is the new price per share?

Question

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The firm initially has $50 million in cash and $300 million in total assets, implying a share price of $30 ($300 million / 10 million shares). After repurchasing shares with $30 million, the firm has $20 million in cash and $270 million in total assets. The number of shares decreases by 1 million ($30 million / $30 per share), leaving 9 million shares. The new price per share is $270 million / 9 million shares = $30.

A Firm Has $300 Million of Assets That Includes $50