Makeover Inc

question 5

Multiple Choice

Makeover Inc.believes that at its current share price of R16.00 the firm is undervalued in the market.Makeover plans to repurchase 2.4 million of its 20 million shares outstanding.The firm's managers expect that they can repurchase the entire 2.4 million shares at the expected equilibrium price after repurchase.The firm's current earnings are R44 million.If management's assumptions hold, what is the expected market price after repurchase?

• A) R16.00
• B) R17.26
• C) R18.18
• D) R20.00
• E) R24.40

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Definitions:

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The act of becoming extremely stiff or inflexible, often as a physical or emotional response.

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