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The following data apply to Elizabeth's Electrical Equipment: Value of operations $20,000 Short-term investments $1,000 Debt $6,000 Number of shares 300 The company plans on distributing $1,000 by repurchasing stock. What will the intrinsic per share stock price be immediately after the repurchase? Notes: With some combinations of variables, the residual policy may result in zero dividends and a zero payout ratio. These outcomes are noted in the topic [TOP] field if applicable.

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abiolataiwo2015

Answer:

$50

Explanation:

Elizabeth's Electrical Equipment

Total Assets will be :

Value of operations of 20,000+ Short term investments of 1000

=$21,000

Debt = $6000

Hence:

Equity will be :

Assets - Debt

= $21,000-$6,000

Which will give us = $15,000

Number of shares which are outstanding

= 300

$15,000/300

=$50

Therefore the Intrinsic value per share will be $50 immediately after the repurchase has occured.

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