Use the Information for the Question(s)below

question 26

Multiple Choice

Use the information for the question(s) below.
Luther is a successful logistical services firm that currently has $5 billion in cash. Luther has decided to use this cash to repurchase shares from its investors and has already announced the share repurchase plan. Currently, Luther is an all-equity firm with 1.25 billion shares outstanding. Luther's shares are currently trading at $20 per share.
-With perfect capital markets, what is the market price per share of Luther's stock after the share repurchase?

• A)$24
• B)$15
• C)$25
• D)$20

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Definitions:

Economic Theory

A set of principles and frameworks that aim to explain the processes governing production, distribution, and consumption of goods and services in an economy.

Purchasing Price

The amount of money required to buy a certain quantity of goods or services at a given time.

Incentive

A factor, monetary or otherwise, that motivates individuals or entities to act in a certain way.

Price Index

A statistical measure that tracks changes in the price level of a basket of consumer goods and services over a period of time.