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:

Decimal Equivalent

A decimal number that represents the same value as a given fraction or percentage.

Percent Equivalent

The fractional amount expressed as a part of one hundred.

Compound Interest

This form of interest computation involves calculating interest on both the initial principal amount and any interest that has accrued in the past periods on a loan or deposit.

Percent Equivalent

The numeric representation of a ratio or fraction as a part of 100.