In Problem 5, suppose the company has announced it is going to repurchase $17,400 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.

Problem 5

The balance sheet for Quinn Corp. is shown here in market value terms. There are 12,000 shares of stock outstanding.

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Market Value Balance Sheet Cash $ 49,300 Equity $404,300 Fixed assets 355,000 Total $404,300 Total $404,300