Use the information for the question(s) below.

Rockwood Industries has 100 million shares outstanding, a current share price of $25, and no debt. Rockwood's management believes that the shares are under-priced, and that the true value is $30 per share. Rockwood plans to pay $250 million in cash to its shareholders by repurchasing shares. Management expects that very soon new information will come out that will cause investors to revise their opinion of the firm and agree with Rockwood's assessment of the firm's true value.

5) If Rockwood is able to repurchase shares prior to the market becoming aware of the new information regarding Rockwood's true value, then the number of shares outstanding following the repurchase is closest to:

A) 92 million

B) 10 million

C) 75 million

D) 90 million

Answer: Explanation:

6) Assume that Rockwood is not able to repurchase shares prior to the market becoming aware of the new information regarding Rockwood's true value. If Rockwood repurchases the shares following the release of the new information, then the number of shares outstanding following the repurchase is closest to:

A) 92 million

B) 90 million

C) 75 million

D) 10 million

Answer: Explanation

7) Assume that Rockwood is able to repurchase shares prior to the market becoming aware of the new information regarding Rockwood's true value. After the repurchase, and following the release of the new information regarding the true value of Rockwood, the firm's share price is closest to:

A) $30.00

B) $31.50

C) $28.75

D) $30.60

Answer: Explanation:

8) Assume that Rockwood is not able to repurchase shares prior to the market becoming aware of the new information regarding Rockwood's true value. After the release of the new information regarding the true value of Rockwood, and following the repurchase, the firm's share price is closest to:

A) $30.00

B) $30.60

C) $28.75

D) $31.50

Answer: Explanation

9) Calculate Rockwood's stock price following the market becoming aware of the new information regarding Rockwood's true value, if (1) Rockwood completed the repurchase prior to the market becoming aware of the information and (2) Rockwood completed the repurchase following the market becoming aware of the new information.

Answer: