ECB Co. has 1.15 million shares outstanding selling at $24 per share. It plans to repurchase 97,000 shares at the market price using its cash reserves. What will be its market capitalization after the repurchase? What will be its stock price?

Answer: $24

Explanation:

From the question, ECB will have a market capitalization of:

= $24 * 1,150,000

= $27,600,000

We are further told that It plans to repurchase 97,000 shares at the market price using its cash reserves, therefore it will need to pay:

= $24 * 97,000

= $2,328,000

The new market capitalization will be:

= $27,600,000 - $2,328,000

= $25,272,000

Its share price will now be:

= $25,272,000 / (1,150,000 - 97,000)

= $25,272,000/1,053,000

= $24

The stock price is still $24