chap014_sm

Fundamentals of Corporate Finance + Standard & Poor's Educational Version of Market Insight

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CHAPTER 14 An Overview of Corporate Financing Answers to Practice Questions 1. a. Par value is $0.05 per share, which is computed as follows: $435 million/8,702 million shares b. The shares were sold at an average price of: [$435 million + $64,693 million]/8,702 million shares = $7.48 c. The company has repurchased: 8,702 million – 7,629 million = 1,073 million shares. d. Average repurchase price: $29,352 million/1,073 million shares = $27.36 per share. e. The value of the net common equity is: $435 million + $64,693 million + $29,382 million – $29,352 million = $65,158 million 2. Internet exercise; answers will vary. 3. a. The day after the founding of Inbox: Common shares ($0.10 par value) $ 50,000 Additional paid-in capital 1,950,000 Retained earnings 0 Treasury shares at cost 0 Net common equity $2,000,000 b. After 2 years of operation: Common shares ($0.10 par value) $ 50,000 Additional paid-in capital 1,950,000 Retained earnings 120,000 Treasury shares at cost 0 Net common equity $2,120,000 116
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c. After 3 years of operation:
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chap014_sm - CHAPTER 14 An Overview of Corporate Financing...

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