Question
In: Finance
AMC Corporation currently has an enterprise value of $ 400 million and $ 125 million in...
AMC Corporation currently has an enterprise value of $ 400 million and $ 125
million in excess cash. The firm has 10 million shares outstanding and no debt. Suppose AMC uses its excess cash to repurchase shares. After the share repurchase, news will come out that will change AMC's enterprise value to either $ 600 million or $ 200million.
a. What is AMC's share price prior to the share repurchase?
b. What is AMC's share price after the repurchase if its enterprise value goes up? What is AMC's share price after the repurchase if its enterprise value declines?
c. Suppose AMC waits until after the news comes out to do the share repurchase. What is AMC's share price after the repurchase if its enterprise value goes up? What is AMC's share price after the repurchase if its enterprise value declines?
d. Suppose AMC management expects good news to come out. Based on your answers to parts(b) and (c), if management desires to maximize AMC's ultimate share price, will they undertake the repurchase before or after the news comes out? When would management undertake the repurchase if they expect bad news to come out?
e. Given your answer to (d), what effect would you expect an announcement of a share repurchase to have on the stock price? Why?
Solutions
jeff jeffy answered 1 year agoRelated Solutions
AMC Corporation currently has an enterprise value of $450 million and $125 million in excess cash....
AMC Corporation currently has an enterprise value of $450
million and $125 million in excess cash. The firm has 10 million
shares outstanding and no debt. Suppose AMC uses its excess cash to
repurchase shares. After the share repurchase, news will come out
that will change AMC's enterprise value to either $650 million or
$250 million.
a. What is AMC's share price prior to the share
repurchase?
b. What is AMC's share price after the repurchase if its
enterprise value...
AMC Corporation currently has an enterprise value of $400 million and $100 million in excess cash....
AMC Corporation currently has an enterprise value of $400
million and $100 million in excess cash. The firm has 10 million
shares outstanding and no debt. Suppose AMC uses its excess cash to
repurchase shares. After the share repurchase, news will come out
that will change AMC’s enterprise value to either $600 million or
$200 million.
1. What is AMC’s share price prior to the share repurchase?
2. What is AMC’s share price after the repurchase if its
enterprise value...
Question 1 – Payout Policy AMC Corporation currently has an enterprise value of $400 million and...
Question 1 – Payout Policy
AMC Corporation currently has an enterprise value of
$400 million and $100 million in excess cash. The firm has 10
million shares outstanding and no debt. Suppose AMC uses its excess
cash to repurchase shares. After the share repurchase, news will
come out that will change AMC’s enterprise value to either $600
million or $200 million.
Required:
What is AMC’s share price prior to the share
repurchase?
What is AMC’s share price after the repurchase...
AMC Corporation currently has an enterprise value of $ 450million and $ 110million in excess cash....
AMC Corporation currently has an enterprise value of $
450million and $ 110million in excess cash. The firm has 10million
shares outstanding and no debt. Suppose AMC uses its excess cash to
repurchase shares. After the sharerepurchase,news will come out
that will changeAMC'senterprise value to either $ 650million or $
250million.
a.What isAMC'sshare price prior to the sharerepurchase?
b. What isAMC'sshare price after the repurchase if its
enterprise value goesup?What isAMC'sshare price after the
repurchase if its enterprise valuedeclines?
c....
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(i) Boral currently has $400 million market value of debt outstanding. This debt was contracted five...
(i) Boral currently has $400 million market value of debt
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(i) Boral currently has $400 million market value of debt outstanding. This debt was contracted five...
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The preference shares offer an annual dividend of $1.5 per share.
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