Question

A firm has $300 million of assets that includes $40 million of cash and 10 million shares outstanding. If the firm uses $30 million of its cash to repurchase shares, what is the new price per share Group of answer choices $42.00 $24.00 $36.00 $30.00

Answer 1

Answer:

$30.00

Explanation:

Repurchased Shares are called the treasury share, The treasury shares account is contra equity account, which is adjusted in the equity value. After repurchase the company has less outstanding shares than before.

As per given data

Total Asset = $300 million

Number of shares = 10 million

Per share value = $300 million / 10 million = $30 per share

After Repurchase

Total Asset = $300 million - $30 / 10 million - ($30 million / $30)

Total Asset = $270 / 10 million - 1 = $270 million / 9 million = $30 per share