Purchase Solution

# Repurchase of stock - Effect on Stock Price

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Microsoft has \$35 billion in cash/money market securities earning 4% per year. Suppose the company announces that it will use \$25 billion of that cash to repurchase stock. What effect will this have on the stock price? Assume the stock is selling for \$52 per share. There are 4 billion shares outstanding and the expected return of the investors is 12%.

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Calculates the share price after the announcement of repurchase of stock.

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Microsoft has \$35 billion in cash/money market securities earning 4% per year.  Suppose the company announces that it will use \$25 billion of that cash to repurchase stock.  What effect will this have on the stock price? Assume the stock is selling for \$52 per share.  There are 4 billion shares outstanding and the expected return of the investors is 12%.

Cash/money market ...

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