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Calculate the total shares outstanding and market value

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Ellinger Inc. is a mature company in a mature industry. Therefore, it plans to distribute all of its income at year-end, and its earnings are not expected to grow. The CFO is now deciding whether to distribute income to stockholders as dividends or to use the funds to repurchase common stock. She believes the P/E ratio will not be affected by a repurchase. Moreover, she believes that the stock can be repurchased at the end of the year at the current price, $40/share. If there are 5 million shares outstanding before repurchase and the company has excess cash of $2,800,000 to distribute to shareholders through stock repurchase, calculate the total shares outstanding and market value of the firm after this stock repurchase?

Reference no: EM132481143

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