Problem:
Cash $25,000
Fixed Assets $190,000
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Total $215,000
Equity $215,000
5,000 shares of stock outstanding with a declared dividend of $1.20 per share.
Q1. What if the company whats to repurchase $6,000 worth of stock?
Q2. What effect will this transaction have on the equity of the company?
Q3. How many shares will be outstanding?
Q4. What will the new price per share be?
Q5. Show how the share repurchase is effectively the same as a cash dividend.