How much would it cost for Chester Corporation to repurchase all its outstanding shares if the price fell by 10%? Assume no brokerage fees.
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This solution shows how to calculate the cash required to repurchase all shares given a sudden price change.
Repurchasing shares and equity
Fixed assets $310,000
Suppose Chevelle has announced it is going to repurchase $12,600 worth of stock.
What effect will this transaction have on the equity of the firm?
How many shares will be outstanding?
What will the price per share be after the repurchase?
Ignoring tax effects, show how the share repurchase is effectively the same as a cash dividend. There are 9,000 shares outstanding