Stan Inc. is a publicly listed corporation. In 2015, it decided to go private by buying all its 5,000,000 outstanding shares at P5.80 per share. In 2016, it restructured the company by selling its low margin facilities (bowling and billiard centers) for P20,000,000 and concentrated in operating its golf course, tennis, and badminton centers. Within one year, the restructuring improved the compnay's earnings per share to P1.50. This made the company's management consider expanding its golf and tennis operations. Funds for the planned expansion can be raised by going public again and issue the 5,000,000 shares that it previously reacquired. The company's investment bankers said that the shares can be offered to the public at a Price Earnings Ratio of 4 times the present earnings per share of P1.50. At what price will the 5,000,000 shares be offered to the public?

Stan Inc. is a publicly listed corporation. In 2015, it decided to go private by buying all its 5,000,000 outstanding shares at P5.80 per share. In 2016, it restructured the company by selling its low margin facilities (bowling and billiard centers) for P20,000,000 and concentrated in operating its golf course, tennis, and badminton centers. Within one year, the restructuring improved the compnay's earnings per share to P1.50. This made the company's management consider expanding its golf and tennis operations. Funds for the planned expansion can be raised by going public again and issue the 5,000,000 shares that it previously reacquired. The company's investment bankers said that the shares can be offered to the public at a Price Earnings Ratio of 4 times the present earnings per share of P1.50. At what price will the 5,000,000 shares be offered to the public?

Cornerstones of Cost Management (Cornerstones Series)

4th Edition

ISBN:9781305970663

Author:Don R. Hansen, Maryanne M. Mowen

Publisher:Don R. Hansen, Maryanne M. Mowen

Chapter10: Decentralization: Responsibility Accounting, Performance Evaluation, And Transfer Pricing

Section: Chapter Questions

Problem 19E

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