A stock is currently trading for $38. The company has a price–earnings multiple of 10. There...

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Finance

A stock is currently trading for $38. The company has aprice–earnings multiple of 10. There are 100 million sharesoutstanding. Your model indicates that the stock is actually worth$28. 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.
$
After the repurchase, what is the actual price–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 $ .
If the company had used the $350 million to pay a cash dividendinstead of doing a repurchase, what would be the actualprice–earnings multiple after the dividend? Do not roundintermediate calculations. Round your answer to two decimalplaces.

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4.3 Ratings (660 Votes)

Share price 38 PE multiple 10 PE price EPS EPS 3810 38 A Shares before Repurchase 100M Shares Repurchased Amt used for Repurchase Current price of shares 350M 38 9210526 Shares outstanding after repurchase Shares before Repurchase Shares Repurchased 100000000 9210526 See Answer

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