Fred Handel owns 2000 shares of Haydn Inc. stock which is currently selling for $18 per share. If the company repurchases 10% of its outstanding shares at $18 per share and Fred chooses to sell back 200 shares

Question

Quizplus · Accepted Answer

If the company repurchases 10% of its outstanding shares at $18 per share, then they will buy back 0.10 x 2000 = 200 shares. After this repurchase, there will be 2000 - 200 = 1800 outstanding shares.

If Fred chooses to sell back 200 shares, then he will sell back 200/2000 = 0.10 or 10% of his shares. Since the company is buying back 10% of its outstanding shares, the percentage ownership for remaining shareholders will remain the same.

Fred's investment in the company will decrease by the amount he receives from selling the 200 shares, which is 200 x $18 = $3,600. Therefore, the correct answer is C.

Fred Handel Owns 2000 Shares of Haydn Inc