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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

Answer :

abiolataiwo2015

Answer:

Intrinsic value $50

Explanation:

Calculation for the intrinsic per share stock price be immediately after the repurchase

Using this formula

Total Assets = Value of operations + Short term investments

$20,000+$1,000= $21000

Debt = $6000

Formula for Equity

Equity = Assets - Debt

= $21000-$6000 = $15000

Number of shares outstanding = 300

Intrinsic value per share =

$15,000/300

=$50

Share buy back is been seen as a way of returning value to shareholders which means it will not impact the intrinsic value per share.

Therefore the intrinsic value will remain as $50

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