Fundamentals of Financial Management (MindTap Course List)
14th Edition
ISBN: 9781285867977
Author: Eugene F. Brigham, Joel F. Houston
Publisher: Cengage Learning
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Question
Chapter 15, Problem 3P
Summary Introduction
To calculate: Beta’s EPS following the stock repurchase.
Share Repurchase:
When a company issues its shares in the open market and finds that the share issued by the company are undervalued, the management decides to buy back its own shares to decrease the number of shares outstanding.
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Students have asked these similar questions
Company B has a net incme $2million and has 1 million shares.
the company is considering a plan to repurchased 20% of its shares in open market.
share price is trading at $32 per share. Currently the repurchased is expected to have no effect on its net income and PE ratio.
what will be the stock pricefollowing the stock repurchased?
The investment banking firm of Einstein & Co. will use a dividend valuation model to appraise the shares of the Modern Physics
Corporation. Dividends (D₁) at the end of the current year will be $1.40. The growth rate (g) is 10 percent and the discount rate () is 14
percent.
a. What should be the price of the stock to the public? (Do not round intermediate calculations and round your answer to 2 decimal
places.)
Price of the stock
b. If there is a 5 percent total underwriting spread on the stock, how much will the issuing corporation receive? (Do not round
intermediate calculations and round your answer to 2 decimal places.)
Net price to the corporation
c. If the issuing corporation requires a net price of $33.50 (proceeds to the corporation) and there is a 5 percent underwriting spread,
what should be the price of the stock to the public? (Do not round intermediate calculations and round your answer to 2 decimal
places.)
Necessary public price
Consider this example:
Shares of Ex Why Zee, Inc. (ticker symbol: XYZ) are currently
trading at $6 per share. XYZ plans to issue $6M in short term
debt and use the money they borrow to repurchase $6M worth
of their own stock. What effect will the debt issuance and
share repurchase have on the balance sheet?
There isn't enough information to answer this question
Assets will increase by $6M
Liabilities will decrease by $6M
Number of Shares Outstanding will increase by 1 million
Equity will decrease by $6M
Chapter 15 Solutions
Fundamentals of Financial Management (MindTap Course List)
Ch. 15 - Discuss the pros and cons of having the directors...Ch. 15 - Prob. 2QCh. 15 - Would it ever be rational for a form to barrow...Ch. 15 - Modigliani and Miller (MM), on the one hand, and...Ch. 15 - How would each of the following changes tend to...Ch. 15 - One position expressed in the financial literature...Ch. 15 - Prob. 7QCh. 15 - What the difference between a stock dividend and a...Ch. 15 - Most firms like to have their stock selling at a...Ch. 15 - Prob. 10Q
Ch. 15 - What is meant by catering theory, and how might it...Ch. 15 - RESIDUAL DIVIDEND MODEL Axel Telecommunications...Ch. 15 - Prob. 2PCh. 15 - Prob. 3PCh. 15 - STOCK SPLIT After a 5-for-l stock split, Strasburg...Ch. 15 - EXTERNAL EQUITY FINANCING Northern Pacific Heating...Ch. 15 - RESIDUAL DIVIDEND MODEL Welch Company is...Ch. 15 - DIVIDENDS Bowles Sporting Inc. is prepared to...Ch. 15 - ALTERNATIVE DIVIDEND POLICIES Rubenstein Bros....Ch. 15 - ALTERNATIVE DIVIDEND POLICIES In 2014, Keenan...Ch. 15 - RESIDUAL DIVIDEND MODEL Buena Terra Corporation is...Ch. 15 - Prob. 11ICCh. 15 - Prob. 1TCLCh. 15 - Use online resources to work on this chapter's...Ch. 15 - Prob. 3TCLCh. 15 - Prob. 4TCLCh. 15 - Use online resources to work on this chapter's...Ch. 15 - Use online resources to work on this chapter's...
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