# EJH Company Share Repurchase Analysis ## Given Data - **Market Capitalization:** \$2.6 billion - **Shares Outstanding:** 20 million - **Planned Repurchase:** \$90 million --- ## Part a: Price Per Share Before Repurchase The price per share before the repurchase is: \[ \text{Price per share} = \frac{\text{Market Cap}}{\text{Shares Outstanding}} = \frac{\$2{,}600{,}000{,}000}{20{,}000{,}000} = \$130 \] **Answer:** The price per share of EJH right before the repurchase is **\$130**. --- ## Part b: Number of Shares to Be Repurchased \[ \text{Number of shares repurchased} = \frac{\text{Repurchase Amount}}{\text{Share Price}} \] \[ \text{Number of shares repurchased} = \frac{\$90{,}000{,}000}{\$130} = 692,307.692 \] Convert to millions (divide by 1,000,000): \[ \frac{692,307.692}{1,000,000} = .692 \] **Answer:** The number of shares to be repurchased is **.692 million** (rounded to three decimal places). --- ## Part c: Price Per Share After Repurchase (**For completeness**) - After repurchase, the company's equity value falls by \$90 million. - Shares outstanding after repurchase: \( 20,000,000 - 692,308 = 19,307,692 \) - New market cap: \( \$2,600,000,000 - \$90,000,000 = \$2,510,000,000 \) - New price per share: \( \frac{\$2,510,000,000}{19,307,692} = \$130 \) **Explanation:** **In perfect capital markets**, the share price remains at **\$130** after the repurchase. --- ## Summary Table | Step | Value | |------------------------------|-------------| | Price per share before | \$130.00 | | Shares repurchased (million) | .692 | | Price per share after | \$130.00 |

# EJH Company Share Repurchase Analysis ## Objective To analyze the impact of a $90 million share repurchase on EJH Company's share price and the number of shares repurchased. ## Given Data - **Market Capitalization:** \$2.6 billion - **Shares Outstanding:** 20 million - **Planned Repurchase:** \$90 million --- ## Part a: Price Per Share Before Repurchase **Formula:** \[ \text{Price per share} = \frac{\text{Market Cap}}{\text{Shares Outstanding}} \] **Calculation:** \[ \text{Price per share} = \frac{2{,}600{,}000{,}000}{20{,}000{,}000} = 130 \] **Answer:** The price per share of EJH right before the repurchase is **\$130**. --- ## Part b: Number of Shares to Be Repurchased **Formula:** \[ \text{Number of shares repurchased} = \frac{\text{Repurchase Amount}}{\text{Share Price}} \] **Calculation:** \[ \text{Number of shares repurchased} = \frac{90{,}000{,}000}{130} = 692{,}307.692 \] Convert to millions: \[ \frac{692{,}307.692}{1{,}000{,}000} = 0.692 \] **Answer:** The number of shares to be repurchased is **0.692 million**. --- ## Part c: Price Per Share After Repurchase 1. **New Market Capitalization:** \[ \text{New Market Cap} = \text{Old Market Cap} - \text{Repurchase Amount} \] \[ \text{New Market Cap} = 2{,}600{,}000{,}000 - 90{,}000{,}000 = 2{,}510{,}000{,}000 \] 2. **Shares Outstanding After Repurchase:** \[ \text{New Shares Outstanding} = \text{Old Shares Outstanding} - \text{Shares Repurchased} \] \[ \text{New Shares Outstanding} = 20{,}000{,}000 - 692{,}308 = 19{,}307{,}692 \] 3. **New Price Per Share:** \[ \text{New Price per share} = \frac{\text{New Market Cap}}{\text{New Shares Outstanding}} \] \[ \text{New Price per share} = \frac{2{,}510{,}000{,}000}{19{,}307{,}692} \approx 130 \] **Answer:** The price per share of EJH right after the repurchase remains **\$130**. --- ## Summary Table | Step | Value | |------------------------------|-------------| | Price per share before | \$130.00 | | Shares repurchased (million) | 0.692 | | Price per share after | \$130.00 | --- ## Final Answer The price per share before the repurchase is **\$130**, the number of shares repurchased is **0.692 million**, and the price per share after the repurchase remains **\$130**.

EJH Company has a market capitalization of \$2.6 billion with 20 million shares outstanding, resulting in a share price of \$130 before the planned \$90 million repurchase. The repurchase will reduce the number of shares outstanding by approximately 0.692 million shares. Post-repurchase, the company's market cap decreases by \$90 million, but the share price remains unchanged at \$130 due to the assumption of perfect capital markets.

## Part a: Price Per Share Before Repurchase Before the share repurchase, EJH Company's market capitalization of \$2.6 billion and 20 million shares outstanding lead to a share price of \$130. This is calculated by dividing the total market cap by the number of shares. This price reflects the value each share holds in the market prior to any changes from the repurchase activity. ## Part b: Number of Shares to Be Repurchased EJH plans to use \$90 million for the share repurchase. To determine the number of shares that will be bought back, we divide the repurchase amount by the current share price of \$130. This results in approximately 0.692 million shares being repurchased, which reduces the total shares outstanding and impacts the company’s equity structure. ## Part c: Price Per Share After Repurchase After the repurchase, EJH's market capitalization decreases by the \$90 million spent on buybacks, but the share price remains unchanged at \$130 due to the assumption of perfect capital markets. The number of shares outstanding decreases as a result of the repurchase, but since the total value of the company adjusts proportionately, the price per share does not change. This illustrates the concept that in perfect capital markets, such transactions do not affect the share price.