Purchase Solution

Stock Repurchase Shares & Value of Operations

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A firm has 10 million shares outstanding, with a $20 per share market price. The firm has $25 million in extra cash that it plans to use in a stock repurchase; the firm has no other financial investments.

What is the firm's value of operations, and how many shares will remain after the repurchase?

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Solution Summary

The solution explains how to calculate the number of shares to repurchase and the value of operations after repurchase.

Solution Preview

The current value of the firm is 10 million shares X $20 per share = $200 million.
After the repurchase, firm ...

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