Question: (Stock repurchases and earnings per share) CareMore, Inc. provides in-home medical assistance to the elderly and earned net income of $5 million that it plans to use to repurchase shares of the firm's common stock, which is currently selling for $50 a share. CareMore has 20 million shares of stock outstanding.
a. What fraction of the firm's shares can the firm repurchase for $5 million?
b. If the share repurchase has no impact on the firm's net income, what will be its earnings per share after the repurchase?