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erastovalidia [21]
3 years ago
14

The market value balance sheet for Cherry Pie Corp. reflects a cash of $22,000, fixed assets of $209,000, and equity of $231,000

. There are 5,000 shares of stock outstanding with a par value of $1 per share. The company has announced that it is going to repurchase $18,000 worth of stock. Other things equal, what will the price of the stock be after this repurchase?A) $36.60 B) $43.80 C) $50.10 D) $42.60 E) $39.20
Business
1 answer:
Blizzard [7]3 years ago
8 0

Answer:

The correct answer is D.

Explanation:

Equity = $231,000

No. of outstanding shares = 5,000

Price of share = \frac{231,000}{5000}

Price of share = $46.2

Repurchased shares worth $18,000

No. of shares repurchased = \frac{18,000}{46.2}

No. of shares repurchased = 390

When the shares would have been repurchased then the value of equity would decrease by the same amount.

Revised equity = $231,000 - $18,000

Revised equity = $213,000

No. of shares outstanding = 5,000 - 390

No. of shares outstanding = 4,610

Thus, the price of each share would be:

Share price = \frac{213,000}{4,610}

Share price = $42.60

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