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4. The following data apply to Global Corp.: Value of operations $20,000 Short-term investments $1,000 Debt...

4. The following data apply to Global Corp.: Value of operations $20,000 Short-term investments $1,000 Debt $6,000 Number of shares 300 The company plans on distributing $50 million by repurchasing stock. What will the intrinsic per share stock price be immediately after the repurchase?

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Expert Solution

Global Corporation
Particulars Amt Millions
Value of Operations            20,000.00
Add Short term Invetsment              1,000.00
Value of Firm            21,000.00
Value of Debt              6,000.00
So, Value of Equity=Value of Firm-Value of Debt=            15,000.00
No of Shares outstanding before repurchase                 300.00
Price /share=15000/300= $                  50.0
Cost of Repurchase in Millions                    50.00
No of shares reporchased =50,000,000/50=1 Million
No Of Share outstanding after repurchase in millions =300-1=                 299.00
Value of Firm after After Repurchase
Particulars Amt Millions
Value of Operations                  20,000
Add Short term Invetsment                    1,000
Less : Amount distributed for repurchase of shares                       (50)
Value of firm after repurchase                  20,950
Less : value of debt                  (6,000)
Value of Equity after Repurchase            14,950.00
No Of Share outstanding after repurchase in millions =                 299.00
Intrinsic value per share =20950/299=                    50.00
So intrinsic value of share after repurchase=$50

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