Question
In: Finance
The balance sheet for Pie Crust, Inc., is shown here in market value terms. There are...
|
The balance sheet for Pie Crust, Inc., is shown here in market value terms. There are 15,000 shares of stock outstanding. |
| Market Value Balance Sheet |
| Cash | $140,000 | |||
| Fixed assets | 470,000 | Equity | $610,000 | |
| Total | $610,000 | Total | $610,000 | |
|
In lieu of a dividend of $1.20, the company has announced it is going to repurchase $18,000 worth of stock instead of paying a dividend. |
| Requirement 1: | |
| What effect will this transaction have on the equity of the firm? (Do not round intermediate calculations. Input the amount as positive value.) |
| Will (Click to select)reduceincrease shareholders’ equity by $ |
| Requirement 2: | |
|
How many shares will be outstanding after the repurchase? (Do not round intermediate calculations.Round your answer to the nearest whole number (e.g., 32).) |
| New shares outstanding |
| Requirement 3: | |
|
What will the price per share be after the repurchase? (Do not round intermediate calculations. Round your answer to 2 decimal places (e.g., 32.16).) |
| Share price | $ |
| Requirement 4: | |
| Is the share repurchase effectively the same as a cash dividend? |
Solutions
Expert Solution
Calculate the repurchase of equity and number of shares after repurchase as follows:
Formulas:
jeff jeffy answered 1 year agoRelated Solutions
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Equity
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Fixed assets
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Taxable income
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