Centropen Inc.has 460 000 shares outstanding and the total market value of the equity is $1 610 000.The firm has just announced a repurchase of $420 000 worth of shares.After the repurchase,Centropen will have ____ shares outstanding at a market price of ____ per share.

Question

Quizplus · Accepted Answer

After the repurchase, the market value of equity will be $1,610,000 - $420,000 = $1,190,000. The market price per share before the repurchase is $1,610,000 / 460,000 = $3.50. Since the repurchase does not affect the price per share, the market price remains $3.50. The number of shares repurchased is $420,000 / $3.50 = 120,000. Therefore, the remaining shares outstanding are 460,000 - 120,000 = 340,000.