The following data apply to Hill's Hiking Equipment: Value of operations $20,000, Short-term investments $1,000, Debt $6,000, Number of shares 300; The company plans on distributing $50 million by repurchasing stock. What will the intrinsic per share stock price be immediately after the repurchase?

$50

Explanation:

Solution

Recall that:

The company plans on giving out $50 million by repurchasing stock hence, number of stock to be purchased = 50/50 = 1 million

The Number of share bought back = 300-1 = 299

Thus

$20,000 + $1,000 - $6000 = $15,000

$15,000 / 300 shares = $50

                                    Before Repurchase  After the repurchase

Value of operations    20000                          20000

Short-term investments    1000                        950

Less : Debt                    6000                           6000

Intrinsic value of equity    15000                      14950

Number  of shares           300                           299

Intrinsic value per share    50                           50

Therefore the intrinsic per share stock price be immediately after the repurchase is $50

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