Analyzing and Computing Issue Price, Treasury Stock Cost and Shares Outstanding The following is a stockholder equity section from Chipotle Mexican Grill, Inc. balance sheet (in thousands), except per share data.) Shareholder’s Equity December 31, 2014Preferred stock, $0.01 par value. 600,000 shares authorized, no shares issued as o the 12/31/2014 ……..Common stock $0.01 par value 230,000 shared authorized, and 35, 394 shares issued 12/31/2014 354Additional paid in capital 1,038,932Treasury stock at cost, 4,367 common stock at 12/31/2014 (748,759)Accumulated other comprehensive income (429)Total shareholder’s equity $2,012,369d. At what average cost has Chipotle repurchase its treasury on December 31, 2014?e. Give 3 reasons why a company such as Chipotle would want to repurchase almost $750 million in common stock.

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Asked Nov 26, 2019
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Analyzing and Computing Issue Price, Treasury Stock Cost and Shares Outstanding
The following is a stockholder equity section from Chipotle Mexican Grill, Inc. balance sheet (in thousands), except per share data.)
Shareholder’s Equity December 31, 2014
Preferred stock, $0.01 par value. 600,000 shares authorized,
no shares issued as o the 12/31/2014 ……..

Common stock $0.01 par value 230,000 shared authorized,
and 35, 394 shares issued 12/31/2014 354

Additional paid in capital 1,038,932
Treasury stock at cost, 4,367 common stock at 12/31/2014 (748,759)
Accumulated other comprehensive income (429)
Total shareholder’s equity $2,012,369

d. At what average cost has Chipotle repurchase its treasury on December 31, 2014?


e. Give 3 reasons why a company such as Chipotle would want to repurchase almost $750 million in common stock.

 

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Expert Answer

Step 1

A buy back of shares means the repurchase of shares by the company. Under buy back, the company purchase the share from the shareholders of the company. It reduces issued capital of the company.

Step 2

d)

Number of treasury stock: 4,367

Amount of treasury stock: $748,759

The average price at which the C corporation should repurchase treasury stock on December 31, 2014 is calculated as follows:

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amount of treasury stock Average price number of treasury stock $748, 759 4,367 =$171.45

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Step 3

e)

The reasons for which a company like C corporation should repurchase almost 750 million its common stock is as follows:

  • The company should buy back its share to raise the funds for capital. It fulfills the capital needs of firm.
  • The company should buy back its shares to offset the di...

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