Hi, could you please tell me if this is right?

The firms CFO is currently considering a transaction to repurchase shares using excess cash of $800,000. The value of the firms other assets is $5,200,000. The firm has 600,000 shares outstanding and the total value of equity is worth $6,000,000. Assume the book value of assets equals the market value. The firm has a net income of $700,000. If the firm spends all of its excess cash on a share repurchase program, how many shares of stock will be outstanding after the stock repurchase is completed?

Step 1

Calculate the price per share

Shareholders equity = equity + net income

Shareholders equity =

6,000,000+ 700,000

Shareholders equity =

$6,700,000

Price per share = Divide shareholder equity / # of current outstanding shares

Price per share =

$6,700,000 / 600,000

Price per share =

$11.16666667

Step 2:

Calculate the number of shares to be repurchased

Excess cash used to purchase shares

$800,000

Price per share =

$11.17

# of shares to repurchase = excess cash / price per share

# of shares to repurchase =

71,641.79

# of shares repurchased =

71,641 shares

Step 3:

Calculate how many shares of stock will be outstanding after the stock repurchase is completed.

OS=

Outstanding shares

OS after the stock is repurchased = Current OS minus # of shares repurchased

OS =

600,000 71,641

OS =

528,359

after the share purchase

B. Consider the situation of Firm Ltd in part (a) above. What will the stock price per share be if the firm pays out its excess cash as a cash dividend?

If the firm pays out it's excess cash as a cash dividend the share price will decrease.

Decrease in share price =

Cash paid/OS shares

Decrease in share price =

$800,000/528,359

Decrease in share price =

$ 1.51

New share price after the dividend is paid =

share price - decrease in share price post dividends paid

New share price after dividend

$ 8.49