In The Previous Problem Suppose The Company Has Announced It Is Going To Repurch

  • In the previous problem, suppose the company has announced it is going to repurchase $18,000 worth of stock instead of paying a dividend. 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.

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