A firm has $200 million of assets that includes $50 million of cash and 8 million shares outstanding.If the firm uses $20 million of its cash to repurchase shares,what is the new price per share?

Question

Quizplus · Accepted Answer

The firm has $200 million of assets, including $50 million of cash and 8 million shares outstanding. If the firm uses $20 million of its cash to repurchase shares, the new number of shares outstanding will be 8 million - (20 million / $25) = 7.6 million. The new price per share will be $200 million / 7.6 million = $26.32.

A Firm Has $200 Million of Assets That Includes $50