Reading 30: Dividends and Dividend Policy LOS d～ Q1-3 Automotive, market, price, share

youzizhang

 

LOS d: Calculate the book value effect of a share repurchase when the market value of a share is greater (less) than book value per share.

Q1. The share price of Solar Automotive Industries is $50 per share. It has a book value of $500 million and 50 million shares outstanding. What is the book value per share (BVPS) after a share repurchase of $10 million?

A)   $10.12

B)   $10.00.

C)   $9.84.

 

Q2. The share prices of Solar Automotive Industries and Winnipeg Auto Unlimited are both $50 per share, and each company has 50 million shares outstanding. On September 30, both companies announced a $10 million stock buyback. Solar has a book value of $500 million, while Winnipeg has a book value of $900 million. How much did the book value per share (BVPS) of each company increase or decrease after the share repurchase?

          Solar Automotive Industries       Winnipeg Auto Unlimited

 

A) Decrease by $0.13                            Decrease by $0.13

B) Decrease by $0.16                            Decrease by $0.13

C) Increase by $0.13                              Increase by $0.16

 

Q3. The share price of Winnipeg Auto Unlimited is $5 per share. There are 50 million shares outstanding, and Winnipeg has a book value of $900 million. What is the book value per share (BVPS) after the share repurchase of $10 million?

A)   $18.54.

B)   $21.24.

C)   $14.76.

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