Five shareholders together own 35 percent of the outstanding stock of Edmonds Industries. The remaining 65 percent is divided among several thousand shareholders. There are 400,000 shares of Edmonds stock currently outstanding. A condensed balance sheet follows:

It has became known that Vadar, Inc. is planning to take over Edmonds by purchasing a controlling interest of the outstanding stock. Vadar hopes to gain enough control to elect a new board of directors and replace Edmonds's current management. The current board of director, on which the five major shareholders serve, is considering how to block the apparent takeover attempt.Required(a) Describe how the company might be able to block the takeover attempt through a program of treasury stock purchases How many shares would the company need to purchase to concentrate ownership enough to keep Vadar from acquiring a controlling interest? Assume that the other member of the board own no stock.(b) The current market price of the outstanding stock is $45, but the board feels that any major buyback would have to be at a premium-approximately $50 per share. How much cash would Edmonds need to purchase enough shares to block the takeover attempt?(c) Assume that Edmonds was able to borrow $4 million arid used the cash to buy back the necessary number of shares. Prepare the balance sheet of Edmonds after stock had been purchased.(d) Compute the debt/equity ratio for Edmonds both before and after the treasury stock purchase. Comment on the effect of the purchase on the company's financialposition.

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LIABILITIES AND SHAREHOLDERS' EQUITY S 1,250,000 ASSETS Cash Other current assets Noncurrent assets Liabilities Common stock Retained earnings Total liabilities and shareholders' equity S 3,150,000 4,200,000 8,220,000 8,000,000 6,320.000 Total assets S15.570,000 $15,570,000