Question: In the previous problem, suppose Rami has announced it is going to repurchase $9,000 worth of stock. What effect will this transaction have on the

In the previous problem, suppose Rami has announced it is going to repurchase $9,000 worth of stock. What effect will this transaction have on the equity of the firm? How many shares will be outstanding? What will the price per share be after the repurchase? Ignoring tax effects, show how the share repurchase is effectively the same as a cash dividend.

In Previous Problem

The balance sheet for Rami Corp. is shown here in market value terms. There are 7,200 shares of stock outstanding.

MARKET VALUE BALANCE SHEET $ 43,000 Equity 198,000 $241,000 Cash Fixed assets Total Total $241,000 $241,000

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