Use the Information for the Question(s)below

question 61

Multiple Choice

Use the information for the question(s) below.
Rockwood Industries has 100 million shares outstanding,a current share price of $25,and no debt.Rockwood's management believes that the shares are underpriced,and that the true value is $30 per share.Rockwood plans to pay $250 million in cash to its shareholders by repurchasing shares.Management expects that very soon new information will come out that will cause investors to revise their opinion of the firm and agree with Rockwood's assessment of the firm's true value.
-Assume that Rockwood is not able to repurchase shares prior to the market becoming aware of the new information regarding Rockwood's true value.After the release of the new information regarding the true value of Rockwood,and following the repurchase,the firm's share price is closest to:

• A)$30.00.
• B)$30.60.
• C)$28.75.
• D)$31.50.

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Definitions:

Dissociates

Refers to the process by which molecules or ionic compounds split into smaller particles, often ions, in solution.

Rainwater

Water precipitated from clouds in the form of rain, often considered as a natural source of relatively clean water.

Acidic

A description for substances with a pH less than 7, indicating a higher concentration of hydrogen ions (H+) than water.

Hydrogen Ion

A positively charged ion (H+) formed when a hydrogen atom loses its electron.