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$3.00 SureThing - Stock repurchases
- From Business: Finance , Economics: Financial-Markets
- Closed, but you can still post tutorials
- Due on Jan. 15, 2008
- Asked on Jan 04, 2008 at 2:13:59PM
Q:( Stock Repurchase – Sure Thing Inc. )
Sure Thing Inc. has earnings this year of $ 16.5 million, 50 percent of which is required to take advantage of the firm’s excellent investment opportunities. The firm has 2,062,500 shares outstanding, selling currently at $32 per share.
Susan Long, a major stockholder ( 187,500 shares ), has expressed displeasure with a great deal of managerial policy. Management has approached her about selling her holdings back to the firm, and she has expressed a willingness to do so at $32 per share.
Assuming that the market uses a constant P/E ratio of 4 in valuing the stock, should the firm buy Long’s shares ? Assume that dividends will not be paid on Long’s shares if they are repurchased. ( Hint: Calculate the ex-dividend price of the stock with and without the repurchase, and add to these values the dividends received to determine the remaining shareholders’ value per share )
Attachments:
Stock Repurchase-SureThing.doc (24K)
To which Help said: If nobody else answered it, go ahead. $10. is the highest you can put without having the money in your account at the time.
