In: Finance
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?
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 |