ATI Corporation currently has an enterprise value of $200 million and $60 million in excess cash. The firm has 15 million shares outstanding and no debt. Suppose ATI uses its excess cash to repurchase shares. After the share repurchase, news will come out that will change ATI's enterprise value to either $275 million or $125 million.

a. What is ATI's share price prior to the share repurchase?

b. What is ATI's share price after the repurchase if its enterprise value goes up? What is ATI's share price after the repurchase if its enterprise value declines?

c. Suppose ATI waits until after the news comes out to do the share repurchase. What is ATI's share price after the repurchase if its enterprise value goes up? What is ATI's share price after the repurchase if its enterprise value declines?

d. Suppose ATI management expects good news to come out. Based on your answers to parts b and c, if management desires to maximize ATI's ultimate share price, will they undertake the repurchase before or after the news comes out? When would management undertake the repurchase if they expect bad news to come out?

e. Given your answer to part d, what effect would you expect an announcement of a share repurchase to have on the stock price? Why?