What are the benefits of repurchasing shares

Assignment Help Financial Management
Reference no: EM131343695

Share repurchase proposal: Currently, the firm has available capital (cash and net income) of approximately $5,000,000. There is a large block of stock available at $25 a share.

If the firm decides to spend this amount of excess cash on a share repurchase program, how many shares of stock will be outstanding after the stock repurchase is completed?

Shares outstanding is 15,000,000

What are the benefits of repurchasing shares? How will this affect the capital structure of the company? How can this be interpreted in the marketplace?

Would a dividend be better? Please discuss the pros and cons of dividends and share buybacks. Make a recommendation to management.

Concept Check: There are tax ramifications which tend to get very complex; for the sake of this exercise let us disregard tax implications and effects.

Reference no: EM131343695

Questions Cloud

Calculate the freezing point of sea water : For this question imagine that sea water is a 3.5 mass % solution of NaCl with a density of 1.00g/mL. Assume full dissociation of the NaCl. a) Calculate the freezing point of sea water. Briefly explain why it is not 0 (degrees Celsius).
Collect some of the current accounts receivable : General hospital has a current ratio of 0.5. Which of the following actions would improve (increase) this ratio? Use cash to pay off current liabilities. Collect some of the current accounts receivable. Use cash to pay off some long term debt.
Present value of an investment future cash flows : The difference between the present value of an investment’s future cash flows and its initial cost is the: What is the net present value of a project with an initial cost of $36,900 and cash inflows of $13,400, $21,600, and $10,000 for Years 1 to 3, ..
Moles and the mass of magnesium carbonate : The number of moles and the mass of magnesium carbonate, MgCO3, required to produce 283 g of carbon dioxide. (MgO is the other product.)
What are the benefits of repurchasing shares : Share repurchase proposal: Currently, the firm has available capital (cash and net income) of approximately $5,000,000. There is a large block of stock available at $25 a share. What are the benefits of repurchasing shares? How will this affect the c..
Characteristic features of the graph : Sketch the shape of the pH curve you would obtain for this titration, and label all characteristic features of the graph.
Explain the difference between real gdp and nominal gdp : Define the GDP and explain how GDP is different from the Gross National Product (GNP). Explain the difference between Real GDP and Nominal GDP.
Aqueous solution of lactic acid : Lactic acid (C3H603), which occurs in sour milk, sauerkraut and sore muscles, is weak monoprotic acid (Ka 0.00014). a) Calculate the pH of a 0.125M aqueous solution of lactic acid.
What is a swot analysis : This assignment is all about you. Be as honest as you can in your assessment so you can use this information to make the most of your education as you move forward in this class and through your future learning experiences. What is a SWOT analysis

Reviews

Write a Review

Financial Management Questions & Answers

  Corporate bonds predicts interest rates

Assume the manager of corporate bonds predicts interest rates will rise in the near future. What adjustments should be made to assuming the market has not already adjusted for this prediction?

  What is the firms earnings per share

A firm has total assets of $150 million, liabilities of $90 million, and a return on assets of 8%. What is the return on equity? A company’s stock is trading at $35 a share. The company has a P/E ratio of 16, and pays $0.30 in dividends per share. Wh..

  Prepare monthly revenue-expense variance report for clinic

Detailed variance analysis. A dermatology clinic expects to contract with an HMO for an estimated 100,000 enrolees. The HMO expects one in four of its enrolled members to use the dermatology services per month. prepare monthly revenue and expense var..

  What is the maximum amount a firm may have to borrow

Given the following information, construct the firms cash budget for the given months. All sales are for credit and collections occur after 30 days. A 100,000 treasury bill matures in March. What is the maximum amount a firm may have to borrow?

  Assume interest payments are semiannual

Compute the price of a 6.5 percent coupon bond with 15 years left to maturity and a market interest rate of 10.8 percent. (Assume interest payments are semiannual.)

  What does term risk mean in the context of capital budgeting

Iron Ore What? (IOW) Casting Company is considering adding a new line to its product mix. Sydney Johnson, a recently minted MBA, will be conducting the capital budgeting analysis. What does the term “risk” mean in the context of capital budgeting? To..

  The bond makes no payments for the first six years

Jallouk Corporation has two different bonds currently outstanding. Bond M has a face value of $40,000 and matures in 20 years. The bond makes no payments for the first six years, then pays $2,500 every six months over the subsequent eight years, and ..

  Difference in approach of international financial accounting

What is the major difference in the approach of international financial accounting and U.S. GAAP accounting? What are the advantages of disadvantages of each?

  Construct a hedge and evaluate how your investment will do

Construct a hedge and evaluate how your investment will do if in six months the stock is at SF926.50, the spot exchange rate is $0.7301, and the futures price is $0.7295.

  Compute price of bonds based on semiannual analysis

You are called in as a financial analyst to appraise the bonds of Olsen's Clothing Stores. The $1,000 par value bonds have a quoted annual interest rate of 10 percent, which is paid semiannually. The yield to maturity on the bonds is 10 percent annua..

  Which bond fund has higher risk

Which bond fund has higher risk (all else being equal): a fund with an average maturity of 10 years, or a fund with an average duration of 9 years?

  More volatility in cash flow and therefore price volatiilty

An issuer is trying to structure a floating rate tranche in a CMO offering. The tranche will be backed by mortgages with 8% interest rate and current balance of $2000000. Interest payable to investors in the floating rate securities (F) and investors..

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd