Question

AMC Corporation currently has an enterprise value (EV) of $310 million and $105 million in excess cash. The firm has 25 million shares outstanding and no debt. Suppose AMC uses its excess cash to repurchase shares. After the share repurchase, news will come out that will change AMC's enterprise value to either $510 million or $110 million. What is AMC's share price prior to the share repurchase?

Answer 1

The share price of AMC Corporation prior to the share repurchase is $8.20 per share. This is calculated by subtracting the excess cash from the enterprise value to obtain the market capitalization, which is then divided by the number of shares outstanding.

Step-by-step explanation:

The share price prior to the share repurchase of AMC Corporation can be calculated by considering the enterprise value (EV) and the excess cash that the company holds. To find the current share price, we subtract the excess cash from the enterprise value to get the market capitalization, and then divide by the number of shares outstanding. The enterprise value of AMC is $310 million, and it has $105 million in excess cash. The market capitalization would thus be $310 million - $105 million = $205 million. With 25 million shares outstanding, the share price is $205 million / 25 million shares = $8.20 per share.