You are the new junior financial analyst at North Star Enterprises. You are alone in the office, working late one afternoon, when the Treasurer of the corporation, Ms. Halle Berry, comes to your desk. Ms. Berry explains that she was just scheduled into a 9:00 a.m. meeting tomorrow with the company's board of directors, which wants to discuss a stock repurchase program. Ms. Berry asks you to prepare a short memo which describes the necessary conditions for a successful stock buyback program and which makes a recommendation on whether North Star should undertake a stock buyback program. Thinking quickly, you ask Ms. Berry a number of questions, and establish the following: . Last year, North Star had sufficient cash to fund all of its NPV-positive projects, and will have funds to do so again this year and next year. The current price of North Star's common stock is $42.00 per share. The consensus of analysts who follow North Star is that a fair (intrinsic) value for the company's common stock is $63.00. North Star has excess cash, is not in a net borrowing mode, and is likely to remain so for the foreseeable future. . ASSIGNMENT: Write a memorandum to Ms. Berry, which consists of: A one-sentence statement of purpose for the memo. A description of the three conditions necessary for a stock repurchase program to benefit shareholders. A short analysis of whether North Star meets any or all of the three conditions A one-sentence recommendation whether North Star should undertake a stock repurchase program at this time. . . You are the new junior financial analyst at North Star Enterprises. You are alone in the office, working late one afternoon, when the Treasurer of the corporation, Ms. Halle Berry, comes to your desk. Ms. Berry explains that she was just scheduled into a 9:00 a.m. meeting tomorrow with the company's board of directors, which wants to discuss a stock repurchase program. Ms. Berry asks you to prepare a short memo which describes the necessary conditions for a successful stock buyback program and which makes a recommendation on whether North Star should undertake a stock buyback program. Thinking quickly, you ask Ms. Berry a number of questions, and establish the following: . Last year, North Star had sufficient cash to fund all of its NPV-positive projects, and will have funds to do so again this year and next year. The current price of North Star's common stock is $42.00 per share. The consensus of analysts who follow North Star is that a fair (intrinsic) value for the company's common stock is $63.00. North Star has excess cash, is not in a net borrowing mode, and is likely to remain so for the foreseeable future. . ASSIGNMENT: Write a memorandum to Ms. Berry, which consists of: A one-sentence statement of purpose for the memo. A description of the three conditions necessary for a stock repurchase program to benefit shareholders. A short analysis of whether North Star meets any or all of the three conditions A one-sentence recommendation whether North Star should undertake a stock repurchase program at this time
