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Answer: $19.77.
**Calculation:** 1. **Current book value of equity:** \[ \text{Current BVE} = \$20 \times 9,000,000 = \$180,000,000 \] 2. **Cash used for repurchase:** \[ \text{Cash used} = 400,000 \times \$25 = \$10,000,000 \] 3. **New book value of equity:** \[ \text{New BVE} = \$180,000,000 - \$10,000,000 = \$170,000,000 \] 4. **New shares outstanding:** \[ \text{New shares} = 9,000,000 - 400,000 = 8,600,000 \] 5. **New book value per share:** \[ \text{New BVPS} = \frac{\$170,000,000}{8,600,000} = \$19.77 \] Since the market price ($25) is greater than the current BVPS ($20), the buyback decreases BVPS. The closest option is **$19.77**.
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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.