Question

A company with 20 million shares outstanding decides to repurchase 2 mil-lion shares at the prevailing market price of €30 per share. At the time of the buyback, the company reports total assets of €850 million and total liabilities of €250 million. As a result of the buyback, that company's book value per share will increase by how much?

Answer 1

The book value per share will increase by approximately €0.1111.

Step-by-step explanation:

The book value per share will increase by the amount of the repurchased shares divided by the remaining shares outstanding. In this case, the company repurchases 2 million shares out of the 20 million shares outstanding, leaving 18 million shares remaining. The increase in book value per share can be calculated as:

Book value per share increase = Repurchased shares / Remaining shares

= 2,000,000 / 18,000,000

= 0.1111

Therefore, the book value per share will increase by approximately €0.1111.