AMC Corporation currently has an enterprise value of $450 million and $105 million in excess cash. The firm has 10 million shares outstanding and no debt. Suppose AMC uses its excess cash to repurchase shares. After the sharerepurchase, news will come out that will changeAMC's enterprise value to either $650 million or $250 million.

a. What isAMC's share price prior to the sharerepurchase?

AMC's share price prior to the share repurchase is $_____. (Round to the nearestcent.)

b. What isAMC's share price after the repurchase if its enterprise value goesup? What isAMC's share price after the repurchase if its enterprise valuedeclines?

AMC's share price after the repurchase if its enterprise value goes up is $________. (Round to the nearestcent.)

AMC's share price after the repurchase if its enterprise value declines is $________. (Round to the nearestcent.)

c. Suppose AMC waits until after the news comes out to do the share repurchase. What isAMC's share price after the repurchase if its enterprise value goesup? What isAMC's share price after the repurchase if its enterprise valuedeclines?

If AMC waits until after the news comes out to do the sharerepurchase, the share price after the repurchase if its enterprise value goes up is $_______. (Round to the nearestcent.)

If AMC waits until after the news comes out to do the sharerepurchase, the share price after the repurchase if its enterprise value declines is $________. (Round to the nearestcent.)

d. Suppose AMC management expects good news to come out. Based on your answers to parts (b) and (c), if management desires to maximizeAMC's ultimate shareprice, will they undertake the repurchase before or after the news comesout? When would management undertake the repurchase if they expect bad news to comeout?

To maximize its shareprice, AMC will prefer to repurchase shares (Select the best choicebelow.)

A.

Before either good or bad news comes out.

B.

Before good news and after bad news comes out.

C.

After good news and before bad news comes out.

D.

After either good or bad news comes out

e. Given your answer to (d), what effect would you expect an announcement of a share repurchase to have on the stockprice? Why? (Select the best choicebelow.)

An announcement of a share repurchase implies that management expects bad news to come out or that any good news has already comeout, both of which could have a positive impact on the stock price.

An announcement of a share repurchase implies that management expects good news to come out or that any bad news has already comeout, both of which could have a positive impact on the stock price.