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What effect will the repurchase have on an investor

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Reference no: EM132809938

Problem 1. The stock of a company will go ex-dividend tomorrow. The dividend will be €0.50 per share, and there are 20,000 shares of stock outstanding. The market value of equity is €1,000,000. What price is the stock selling for today? What price will it sell for tomorrow? Ignore taxes.

Problem 2. Now suppose that it announces that instead of paying this dividend (in part 1), it plans to repurchase €10,000 worth of stock instead. After this share repurchase, how many shares will be outstanding, and what will be the share price? What effect will the repurchase have on an investor who currently holds 100 shares and sells 1 of those shares back to the company in the repurchase?

Reference no: EM132809938

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