Cash-2-Day Company currently trades for $20.Analysts regard it as fairly valued at its current price.The company has announced that it intends to spend $200.10 million on an open market repurchase.Assume that the company is able to repurchase shares at a price of $15.There are 400 million shares outstanding prior to the repurchase.What fraction of shares does the company repurchase?

Question

Quizplus · Accepted Answer

The company spends $200.10 million and buys shares at $15, so the quantity purchased is: N_R = 11ea7fdb_fc53_ff98_a768_21d707589553_TB2902_11 = 13,340,000 The fraction repurchased is: f = 11ea7fdb_fc53_ff99_a768_1b57e8384863_TB2902_11 = 11ea7fdb_fc53_ff9a_a768_6551ef29f970_TB2902_11 = 0.03335

Cash-2-Day Company Currently Trades for $20