Answer:
a. AMC's share price prior to the share repurchase is $ 50 per share
b. AMC's share price after the repurchase if its enterprise value goes up is $75.00 per share
Explanation:
a. In order to calculate AMC's share price prior to the share repurchase we would have to make the following calculation:
AMC's share price prior to the share repurchase=Market Capitalization/Number of shares outstanding
According to the given data Number of shares outstanding=10 million shares
Market Capitalization=Enterprise Value + Cash in Hand
Market Capitalization=$400 million + $100 million
Market Capitalization=$500 million
Therefore, AMC's share price prior to the share repurchase=$500 Million / 10 million shares
AMC's share price prior to the share repurchase= $ 50 per share
b. To calculate AMC's share price after the repurchase if its enterprise value goes up we would have to make the following calculation:
AMC's share price after the repurchase if its enterprise value goes up=Market Capitalization/Number of shares outstanding after repurchase
According to the given data After the share repurchase, news will come out that will change AMC's enterprise value to $600 million, hence, Market Capitalization=$600 million
Number of shares outstanding after repurchase=Number of shares outstanding-Number of shares repurchased
Number of shares repurchased= Cash used for repurchase / Market Price per share
Number of shares repurchased=$ 100 million / $ 50 per share
Number of shares repurchased= 2 million shares
Hence, Number of shares outstanding after repurchase=10 million - 2 million
Number of shares outstanding after repurchase=8 million
Therefore, AMC's share price after the repurchase if its enterprise value goes up=$600 million/ 8 million
AMC's share price after the repurchase if its enterprise value goes up=$75.00 per share
