Determine how many shares will be bought back

Assignment Help Finance Basics
Reference no: EM132630856

Rabulani Ltd recently had better than expected earnings which it does not expect to achieve again.

The company wants to distribute 90% of the earnings available to common shareholders for the year through a share repurchase at the current share price, instead of a paying out a dividend. The buy-back will be offset against retained earnings, which comprises nearly the entirety of the company's equity. The company currently has 10 000 000 shares outstanding trading at R5 each, R60 000 000 in total assets (including the earnings available to common shareholders for the year), R50 000 000 in total liabilities and earnings available to common shareholders is R10 000 000.

Required:

Determine how many shares will be bought back and how the share buy-back would influence the number of shares outstanding in the market. Also discuss the effect the buy-back will have on remaining shareholders if the future earnings available to common shareholders are expected to be a constant R10 000 000 per year.

Reference no: EM132630856

Questions Cloud

How much would be the unrealised loss to an investor : How much would be the unrealised loss to an investor (in dollars and cents to two decimal places) if they purchased a 30-year zero-coupon
What was the company net income : Selling and administrative expense of $11,956, and depreciation of $6,705. If the tax rate was 40 percent, what was the company's net income
Demonstrate effect of wrong entry on the financial position : Assume that you are starting a new business on 1st Jan 2021. Demonstrate the effect of wrong entries on the financial position of a business organisation.
Why is capital adequacy the primary concern of bank : Why is capital adequacy the primary concern of bank regulators? Is it more significant compared to other bank ratios and risk computations?
Determine how many shares will be bought back : Determine how many shares will be bought back and how the share buy-back would influence the number of shares outstanding in the market
Prepare the journal entries for the year ended june : Prepare the journal entries for the year ended 30th June 2020. BaaBaa Ltd is a lamb farm, breeding and maturing lambs for future harvesting
Determine the total dividend that conifers ltd : Determine the total dividend that Conifers Ltd will pay per share in 2020.
Government managing the economy : Do you believe government efforts to manage the economy usually make things better or worse? Provide research support for your positions
Why the iasb requires an active market to revalue intangible : When using the revaluation model for tangible assets. Discuss with reasons why the IASB requires an active market to revalue intangible assets.

Reviews

Write a Review

Finance Basics Questions & Answers

  Financial reporting and analysis

Finance is about Gunns Ltd, a company in dealing with forestry products in Australia. The company has also been listed in Australian Stock Exchange. As many companies producing forestry products, even Gunns Ltd is facing various problems. Due to the ..

  A report on financial accounting

This report is specific for a core understanding for Financial Accounting and its relevant factors.

  Describe the types of financial ratios

Describe the types of financial ratios and other financial performance measures that are used during venture's successful life cycle.

  Differences between sole proprietorship and corporation

Briefly describe the major differences between a sole proprietorship and a corporation

  Prepare a cash budget statement

Calculate the expected value of the apartment in 20 years' time. What is the mortgage loan repayment at the beginning of each month

  What are the implied interest rates

What are the implied interest rates in Europe and the U.S.?

  State pricing theory and no-arbitrage pricing theory

State pricing theory and no-arbitrage pricing theory

  Small business administration

Identify the likely stage for each venture and describe the type of financing each venture is likely to be seeking and identify potential sources for that financing.

  Effect of financial leverage

The Effect of Financial Leverage and working capital management

  Evaluate the basis for the payment to the lender

Evaluate the basis for the payment to the lender and basis for the payment to the company-counterparty.

  Importance of opps, ipps, mpfs and dmepos

Research and discuss the differences and importance of : OPPS, IPPS, MPFS and DMEPOS.

  Time value of money

Time Value of Money project

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd