SavedThe Down Towner has a market value balance sheet as shown below. The firm currently has 12,000 shares of stockoutstanding and net income of $17,500.Market Value Balance Sheet$ 14,300Debt$ 77,960Excess cashOther assets215,460Equity151,800Total$229,760Total$229,760The firm has decided to repurchase 10 percent of its outstanding stock at the current market price and fund thatpurchase with new debt. After the repurchase there will beshares outstanding at a price per share ofMultiple Choice10,200; $11.5010,200; $12.6510,800; $12.6510,800; $11.5010,800, $14.05< Prev11 of 20Next>

Price of share = Market value of equity / Shares outstanding Price of share = $151,800 / 12000 Price of Share = $12.65 No. of shares before share repurchase = 12000 shares Shares repurchased =12000*10% = 1200 shares No. of shares after share repurchase = 12000 shares - 1200 shares No. of shares after share repurchase= 10800 shares Price of share will remain same after repurchase i.e. $12.65 Therefore, option B 10,200;$12.65 is the correct answer.

Business

Finance

The Down Towner has a market value balance sheet as shown below. The firm currently has 12,000 shares of stock outstanding and net income of $17,500. Market Value Balance Sheet $ 14,300 Debt 215,460 Equity $229,760 Total $ 77,960 151,800 Excess cash Other assets $229,760 Total The firm has decided to repurchase 10 percent of its outstanding stock at the current market price and fund that purchase with new debt. After the repurchase there will be shares outstanding at a price per share of Multiple Choice 10,200; $11.50 10,200; $12.65 10,800; $12.65 10,800; $11.50 10,800, $14.05

The Down Towner has a market value balance sheet as shown below. The firm currently has 12,000 shares of stock outstanding and net income of $17,500. Market Value Balance Sheet $ 14,300 Debt 215,460 Equity $229,760 Total $ 77,960 151,800 Excess cash Other assets $229,760 Total The firm has decided to repurchase 10 percent of its outstanding stock at the current market price and fund that purchase with new debt. After the repurchase there will be shares outstanding at a price per share of Multiple Choice 10,200; $11.50 10,200; $12.65 10,800; $12.65 10,800; $11.50 10,800, $14.05

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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