Tarbox Tobacco Inc.is an all equity company with 100M shares outstanding.Tarbox's stock last closed at $15.Tarbox has too much cash.The CEO,Walt Raleigh,wants to distribute the excess cash with an open market stock repurchase.He is contemplating buying back $225M worth of shares at a price of $15.Leaf Erickson owns 2 million shares in Tarbox.He purchased his shares before the repurchase for $15.If Leaf does not sell any shares during the repurchase,then what is his proportionate ownership afterwards?

Question

Quizplus · Accepted Answer

The company spends $225 million and buys shares at $15, so the quantity purchased is: N_R = 11ea7fdb_fc52_2ab4_a768_754c7317ed16_TB2902_11 = 15,000,000 Ownership after the repurchase = 11ea7fdb_fc52_2ab5_a768_b364aabe1b4a_TB2902_11 Ownership after the repurchase = 11ea7fdb_fc52_51c6_a768_138e74aaafcb_TB2902_11 Ownership after the repurchase = 0.0235