The following data apply to Elizabeth's Electrical Equipment:

$\begin{array}{l}
\begin{array} { l }
\text {Value of operations}\
\text {Short-term investments}\
\text {Debt}\
\text { Numher of shares }
\end{array}
\begin{array} { l }
\$ 20,000 \
\$ 1,000\
\$ 6,000\
\$ 300\

\end{array}
\end{array}$

The company plans on distributing $1,000 by repurchasing stock. What will the intrinsic per share stock price be immediately after the repurchase?
A) $47.50
B) $50.00
C) $52.50
D) $55.13
E) $57.88

Question

The following data apply to Elizabeth's Electrical Equipment:

$\begin{array}{l}
\begin{array} { l } 
\text {Value of operations}\
\text {Short-term investments}\
\text {Debt}\
\text { Numher of shares }
\end{array}
\begin{array} { l } 
\$ 20,000 \
\$ 1,000\
\$ 6,000\
\$ 300\

\end{array}
\end{array}$

The company plans on distributing $1,000 by repurchasing stock. What will the intrinsic per share stock price be immediately after the repurchase?
A) $47.50
B) $50.00
C) $52.50
D) $55.13
E) $57.88

Quizplus · Accepted Answer

$\begin{array}{l}
\begin{array} { l } 
\
\
\text { Value of operations}\
\text { + Value of nonoperating assets }\
\text { Total intrinsic value of firm}\
\text { -Debt }\
\text { Intrinsic value of equity }\
\text {÷ Number of shares }\
\text {  Intrinsic price per share }\
\text { \# shares repurchased $ = $}\
\text { Value of nonoperating assets / }\
\text { Price prior to distribution}\
\end{array}
\begin{array} { l } 
\text { Prior to }&\text { After }\
\text { Distribution }& \text { Distribution }\
\$ 20.00 &\$ 20.00\
100.00 &0.00\
\hline \$ 21.00&\$ 20.00 \
6000&6000\
\hline \$ 15000& \$ 14000  \
300 &280 \
\hline \$ 50.00& \$ 50.00\
\  \
&\$20.00\
\end{array}
\end{array}$

The Following Data Apply to Elizabeth's Electrical Equipment The Company Plans on Distributing $1,000 by Repurchasing Stock