Fred Handel owns 2000 shares of Haydn Inc. ,which currently sells 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, the outstanding shares will decrease by 10% to 18000. So, the total value of outstanding shares will be $18 x 18000 = $324000.

If Fred chooses to sell back 200 shares, he will receive $18 x 200 = $3600. After selling, he will have 1800 shares left.

His investment in the company will decrease by $3600 (the amount he received from selling his shares), but his percentage of ownership will stay the same because the total value of outstanding shares is still $324000, and he still owns 1800 shares out of 18000, which is 10% of the outstanding shares.

Therefore, the correct answer is C.

Fred Handel Owns 2000 Shares of Haydn Inc