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Answer: $19.77.
## Calculation Process **Step 1: Calculate initial total book value** - Book value per share = $20 - Shares outstanding = 9,000,000 - Total book value = $20 × 9,000,000 = $180,000,000 **Step 2: Calculate cash used for repurchase** - Shares repurchased = 400,000 - Market price = $25 - Cash used = 400,000 × $25 = $10,000,000 **Step 3: Calculate new total book value after repurchase** - New total book value = Initial total book value - Cash used - New total book value = $180,000,000 - $10,000,000 = $170,000,000 **Step 4: Calculate new shares outstanding** - New shares outstanding = 9,000,000 - 400,000 = 8,600,000 **Step 5: Calculate new book value per share** - New book value per share = $170,000,000 ÷ 8,600,000 = $19.767 ≈ $19.77 ## Explanation When a company repurchases shares at a price higher than the current book value per share ($25 > $20), the book value per share decreases. This occurs because the company is paying more than the accounting value of the shares, effectively reducing the overall equity per remaining share. The calculation shows the new book value per share is $19.77, which matches option B.
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18 An analyst gathers the following information about the common stock of a company that is planning to buy back shares:
$20$25After the repurchase of 400 thousand shares at the market price, the company's book value per share will be closest to:
A. $18.89.
B. $19.77.
C. $20.93.
A
$18.89.
B
$19.77.
C
$20.93.
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