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Research online to find a company that bought back shares of its own stock (treasury stock) within the last 6–12 months. Why did it repurchase the shares? What happened to the company’s stock price immediately after the repurchase and in the months since then? Is there any reason to think the repurchase impacted the price?

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Principles of Accounting Volume 1

19th Edition
OpenStax
Publisher: OpenStax College
ISBN: 9781947172685

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FindFindarrow_forward

Principles of Accounting Volume 1

19th Edition
OpenStax
Publisher: OpenStax College
ISBN: 9781947172685
Chapter 14, Problem 5TP
Textbook Problem
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Research online to find a company that bought back shares of its own stock (treasury stock) within the last 6–12 months. Why did it repurchase the shares? What happened to the company’s stock price immediately after the repurchase and in the months since then? Is there any reason to think the repurchase impacted the price?

To determine

Introduction:

When a company repurchasing its shares from the shareholders to decrease the number of its available shares in the market, this re-purchasing of shares is known as buy-back of shares.

To identify:

The company that buys back its own shares. Also, explain the reason and impact of buy back of shares.

Explanation of Solution

HEG Ltd has purchased its own shares in the last six months. This type of buy back was tender offer. The company offered $7,500 million for the buy back. Number of buy back of shares was 1,363,636. The company paid a price of $79.91 per share.

The reason of buy back are as follows:

  • The company had no further expansion projects. The capital contributed by shareholders was idle in the company. To reduce dividend payment to shareholders, company buy back its shares.
  • The company wanted to increase the earning per share of shareholders. It can be increased by reducing the number of shares. So, the company buys back its shares to increase the earning per share.
  • Another reason of buy back of shares was to increase the price of its shares...

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Chapter 14 Solutions

Principles of Accounting Volume 1
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