The Sterling Group is primarily owned by several large investors. The firm earned $5,200,000 after taxes this year. With 2 million shares outstanding, earnings per share were $2.60. The stock recently has traded at $60 per share, among the current shareholders. Two dollars of this value is accounted for by investor anticipation of a cash dividend. As the financial manager of Sterling Group, you are considering the alternative of repurchasing some company common stock by means of a tender offer at $60 per share. How much common stock could the firm repurchase if this alternative were selected?

The Sterling Group is primarily owned by several large investors. The firm earned $5,200,000 after taxes this year. With 2 million shares outstanding, earnings per share were $2.60. The stock recently has traded at $60 per share, among the current shareholders. Two dollars of this value is accounted for by investor anticipation of a cash dividend. As the financial manager of Sterling Group, you are considering the alternative of repurchasing some company common stock by means of a tender offer at $60 per share. How much common stock could the firm repurchase if this alternative were selected?

Intermediate Financial Management (MindTap Course List)

13th Edition

ISBN:9781337395083

Author:Eugene F. Brigham, Phillip R. Daves

Publisher:Eugene F. Brigham, Phillip R. Daves

Chapter18: Initial Public Offerings, Investment Banking, And Capital Formation

Section: Chapter Questions

Problem 9MC

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