The Morrison Company has $1.5 million in excess cash it wishes to distribute to shareholders.
Selected financial information is as follows:
$\begin{array}{lr}
\text {Earnings after taxes: }&\$2,237,500\
\text { Shares of stock outstanding.}&900,000\\text { Price-earrings ratio }&12
\end{array}$
If Morrison chooses to distribute the cash through a stock repurchase and the price-earnings ratio doesn't change through the transaction, what will be the market price of the stock after the shares are acquired?

Question

The Morrison Company has $1.5 million in excess cash it wishes to distribute to shareholders.
Selected financial information is as follows:
 $\begin{array}{lr}
\text {Earnings after taxes: }&\$2,237,500\
\text { Shares of stock outstanding.}&900,000\\text { Price-earrings ratio }&12
\end{array}$
 If Morrison chooses to distribute the cash through a stock repurchase and the price-earnings ratio doesn't change through the transaction, what will be the market price of the stock after the shares are acquired?

Quizplus · Accepted Answer

The Answer of The Morrison Company has $1.5 million in excess cash it wishes to distribute to shareholders.
Selected financial information is as follows:
 $\begin{array}{lr}
\text {Earnings after taxes: }&\$2,237,500\
\text { Shares of stock outstanding.}&900,000\\text { Price-earrings ratio }&12
\end{array}$
 If Morrison chooses to distribute the cash through a stock repurchase and the price-earnings ratio doesn't change through the transaction, what will be the market price of the stock after the shares are acquired?

The Morrison Company Has $1 If Morrison Chooses to Distribute the Cash Through a Stock