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Repurchasing shares and equity

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Cash $43,700
Fixed assets $310,000
Total $353,700

Equity $353,700
Total $353,700

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

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Solution Summary

The solution analyzes the effect of repurchase of equity and share price.

Solution provided by:
Lokesh Jain, MSc
Education
  • BEng (Hons) , Birla Institute of Technology and Science, India
  • MSc (Hons) , Birla Institute of Technology and Science, India
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