To determine the increase in Cox Transport's paid-in capital due to the share repurchase, we need to calculate the gain or loss on the sale of the treasury shares.
First, let's calculate the cost of the treasury shares using the FIFO method. FIFO (First-In-First-Out) assumes that the shares purchased first are the first ones sold.
We acquired 4 million shares at $20 per share, followed by an additional 2 million shares at $26 per share. So, the total cost of the treasury shares is:
(4 million shares * $20 per share) + (2 million shares * $26 per share) = $80 million + $52 million = $132 million.
Now, let's calculate the gain or loss on the sale of 2 million treasury shares at $29 per share.
The proceeds from the sale are:
2 million shares * $29 per share = $58 million.
To determine the gain or loss, we subtract the cost of the treasury shares from the proceeds:
$58 million - $132 million = -$74 million.
Since the cost of the treasury shares is higher than the proceeds from their sale, there is a loss of $74 million.
The increase in the paid-in capital due to the share repurchase can be calculated by dividing the loss by the number of shares repurchased. In this case, 2 million shares were sold:
-$74 million / 2 million shares = -$37 per share.
Therefore, Cox Transport's paid-in capital—share repurchase will increase by $37 per share.