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?

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

jeff jeffy answered 3 years ago

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