Answered step by step
Verified Expert Solution
Question
1 Approved Answer
Stock Repurchase RRS Corporation is deciding to return the money to its shareholders by using all of its current cash, $915,000 to buy back its
Stock Repurchase RRS Corporation is deciding to return the money to its shareholders by using all of its current cash, $915,000 to buy back its stocks. Please help the company analyze the consequences. Assuming the current book value, $6,000,000, of its stock is the same as intrinsic value of the company, and the stock is currently trading at $30 per share with 260,000 number of shares outstanding. The total asset is $15,830,000 with the latest year net income of $1,400,000. a) What is the current book value per share for the company? b) What is the current EPS for the company? c) How many shares will be repurchased? How many shares will remain after the repurchase? d) What is the EPS immediately after the repurchase? e) What is the impact on the new EPS (increase/decrease by how much)? f) Immediately after the repurchase, what is the firm's total asset? g) What is the firm's total liability-to-equity ratio before and after the repurchase? Hint: For this liability, please use the total liabilities. In other words, everything but equity. h) What is the company's book value per share after the repurchase? i) If the company is to continue trading at its current P/E, should the company go ahead with the repurchase plan? What will happen to the current stock price
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started