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A firm has 10,000,000 shares outstanding with a price per share of $24.80 (previous to a share repurchase). The firm repurchases 2,000,000 shares with a price per share of $27.90. A share repurchase is a transaction whereby a company buys back its own shares from the marketplace. (Às the repurchase price is greater than the market price, equity boldors may soll shares to the firm oply

A firm has 10,000,000 shares outstanding with a price per share of $24.80 (previous to a share repurchase). The firm repurchases 2,000,000 shares with a price per share of $27.90. A share repurchase is a transaction whereby a company buys back its own shares from the marketplace. (Às the repurchase price is greater than the market price, equity boldors may soll shares to the firm oply

Essentials Of Investments
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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A firm has 10,000,000 shares outstanding with a price per share of $24.80 (previous to a share repurchase). The firm repurchases 2,000,000 shares with a price per share of $27.90. A share repurchase is a transaction whereby a company buys back its own shares from the marketplace. (Ás the repurchase price is greater than the market price, equity holders may sell shares to the firm only in proportion to their holding.) What will the share price be after the share repurchase is completed? Assume that Modigliani-Miller and its assumptions are true.
Transcribed Image Text:A firm has 10,000,000 shares outstanding with a price per share of $24.80 (previous to a share repurchase). The firm repurchases 2,000,000 shares with a price per share of $27.90. A share repurchase is a transaction whereby a company buys back its own shares from the marketplace. (Ás the repurchase price is greater than the market price, equity holders may sell shares to the firm only in proportion to their holding.) What will the share price be after the share repurchase is completed? Assume that Modigliani-Miller and its assumptions are true.
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