Akash Ltd has a surplus cash of Rs 90 Lakhs and wants to distribute 30% of it to the shareholders. The Company decides to buyback shares. The Finance Manager of the company estimates that its share price after the repurchase is likely to be 10% above the buyback price if the buyback route is taken. The number of shares outstanding at present is 10 lakhs and the current EPS is Rs 3.5/-. You are required to determine: a. The Price at which the shares can be repurchased if the market capitalization of the company should be Rs 200 lakhs after buyback. b. The number of shares that can be repurchased.
Akash Ltd has a surplus cash of Rs 90 Lakhs and wants to distribute 30% of it to the shareholders. The Company decides to buyback shares. The Finance Manager of the company estimates that its share price after the repurchase is likely to be 10% above the buyback price if the buyback route is taken. The number of shares outstanding at present is 10 lakhs and the current EPS is Rs 3.5/-. You are required to determine: a. The Price at which the shares can be repurchased if the market capitalization of the company should be Rs 200 lakhs after buyback. b. The number of shares that can be repurchased.
Practical Management Science
6th Edition
ISBN:9781337406659
Author:WINSTON, Wayne L.
Publisher:WINSTON, Wayne L.
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Q14. Akash Ltd has a surplus cash of Rs 90 Lakhs and wants to distribute 30% of it to the shareholders. The Company decides to buyback shares. The Finance Manager of the company estimates that its share price after the repurchase is likely to be 10% above the buyback price if the buyback route is taken. The number of shares outstanding at present is 10 lakhs and the current EPS is Rs 3.5/-.
You are required to determine:
a. The Price at which the shares can be repurchased if the market capitalization of the company should be Rs 200 lakhs after buyback.
b. The number of shares that can be repurchased.
c. The impact of share repurchase on the EPS, assuming the net income is same.
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