What fraction of shares does the company repurchase

Assignment Help Financial Management

Reference no: EM131586355

Shares of the Mechanical Fruit Company currently trade for $15. Analysts rate the company a hold and regard it as fairly valued at its current price. The company has announced that it intends to spend $233.8000 million on an open market repurchase. In their press release management claims that the company's shares are occasionally undervalued and that buying shares at those undervalued prices represents a good investment Assume that the company is able to repurchase shares at a price of $14.00. Answer the questions that follow. There are 250 million shares outstanding prior to the repurchase. Assume that the company is at equity financed.

1. What fraction of shares does the company repurchase?

2. What stock price prevails after the repurchase?

3. What is the aggregate gain in value to all the shareholders who do not sell any shares as a result of the repurchase of undervalued shares? In other words, if you owned all of the shares that were not repurchased, then what is your profit (loss) from before the repurchase to afterwards?

Reference no: EM131586355

Questions Cloud

Contracts between the insurer and the insured parties : Define and contrast the legal relationships included in these contracts between the insurer and the insured parties.

Calculate cash outflow for taxes associated with new income : Calculate the cash outflow for taxes associated with this new income. What is the net new after-tax income (change in earnings after taxes)?

An asset falling under the macrs five-year class : An asset falling under the MACRS five-year class was purchased three years ago for $200,000 (its original depreciation basis).

What is the clean price of the bond : You purchase a bond with an invoice price of $1043. What is the clean price of the bond?

What fraction of shares does the company repurchase : What fraction of shares does the company repurchase? What stock price prevails after the repurchase?

Analyzing proposed new product-what is contribution margin : Laser Technology, Inc. is analyzing a proposed new product. What is the contribution margin per unit under the best case scenario?

Planning for retire-save money for retirement : Your coworker is planning to retire in 20 years. To help save money for his retirement,

Semiannual bonds outstanding with nine years to maturity : ManMan Corporation has semiannual bonds outstanding with nine years to maturity and the bonds are currently priced at $754.08.

What is the expected return on common share with beta : what is the expected return on a common share with a beta equal to 2?

User Account

All Pages