A stock is currently trading for $32. The company has a priceâ€“earnings multiple of 10. There...

50.1K

Verified Solution

Question

Finance

A stock is currently trading for $32. The company has apriceâ€“earnings multiple of 10. There are 100 million sharesoutstanding. Your model indicates that the stock is actually worth$42. The company announces that it will use $350 million torepurchase shares.
After the repurchase, what is the value of the stock, accordingto your model? Do not round intermediate calculations. Round youranswer to the nearest cent.
$Â Â
After the repurchase, what is the actual priceâ€“earnings multipleof the stock? Do not round intermediate calculations. Round youranswer to two decimal places.
If the company had used the $350 million to pay a cash dividendinstead of doing a repurchase, how would the value of the stockhave changed, according to your model? Do not round intermediatecalculations. Round your answer to the nearest cent.
The market value of the stock is now $Â Â Â .
If the company had used the $350 million to pay a cash dividendinstead of doing a repurchase, what would be the actualpriceâ€“earnings multiple after the dividend? Do not roundintermediate calculations. Round your answer to two decimalplaces.

this is all thats given

Answer & Explanation Solved by verified expert

4.2 Ratings (531 Votes)

A Value of stock after repurchase No of shares repurchased Amount utilised Market price per share 350 million 32 10937500 No of shares outstanding after repurchase 100000000 10937500 89062500 See Answer

Get Answers to Unlimited Questions

Join us to gain access to millions of questions and expert answers. Enjoy exclusive benefits tailored just for you!

Membership Benefits:

Unlimited Question Access with detailed Answers
Zin AI - 3 Million Words
10 Dall-E 3 Images
20 Plot Generations
Conversation with Dialogue Memory
No Ads, Ever!
Access to Our Best AI Platform: Flex AI - Your personal assistant for all your inquiries!

Become a Member