Gamma Industries has net income of $3,800,000, and it has1,490,000 shares of common stock outstanding. The company’s stock currently trades at $67a share. Gamma is considering a plan in which it will use available cash to repurchase 10%of its shares in the open market at the current $67 stock price. The repurchase is expectedto have no effect on net income or the company’s P/E ratio. What will be its stock pricefollowing the stock repurchase?
Gamma Industries has net income of $3,800,000, and it has1,490,000 shares of common stock outstanding. The company’s stock currently trades at $67a share. Gamma is considering a plan in which it will use available cash to repurchase 10%of its shares in the open market at the current $67 stock price. The repurchase is expectedto have no effect on net income or the company’s P/E ratio. What will be its stock pricefollowing the stock repurchase?
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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Gamma Industries has net income of $3,800,000, and it has
1,490,000 shares of common stock outstanding. The company’s stock currently trades at $67
a share. Gamma is considering a plan in which it will use available cash to repurchase 10%
of its shares in the open market at the current $67 stock price. The repurchase is expected
to have no effect on net income or the company’s P/E ratio. What will be its stock price
following the stock repurchase?
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