Question on Buy Back

Q1. The Company has 10 lakh equity shares. Current market price is 400. Company wants to
buy back 1 lakh shares what should be the buyback price.

Q2. NA Ltd with a profit after tax of Rs. 100 lakh plans to use Rs. 25 lakhs of it for cash
dividends or for buying back some of the firms equity. There are 40 lakhs shares outstanding
and market price of Rs. 15 per share (i) what repurchase price would you suggested so that
the investor is indifferent between the two options? (ii) What would be the theoretical
buyback price ? (iii) What would happen if the price offered is above or below this price?

Question on Stock Split/ Bonus Issue

Q3. A ltd. has decided to go public. They have retained the services of an investment banker
who has indicated that a price to earning ratio of about 8 times earnings would be reasonable
for a new offering of this type. In addition, the investment banker figured an offering of this
type. In addition the investment banker figured an offering price of rs. 40 per share would be
apt. A ltd. Has earning after tax of Rs. 75 Lakhs and presently has 5, 00, 000 equity shares.
How large a stock split would you recommended for A ltd. Before they go public.

Q4. (i)A company stock trade at Rs. 90 rs. Per share. The company is contemplating a 3 for 2
split. What would be stock price after split.

(ii) If the present face value is Rs. 12 what would be new face value.

Q5. X ltd. Has 1000 shares of rs. 10 each raised at premium of rs. 15 per share. The
company’s retained earnings are rs. 5, 52,500. The company stock sells for rs. 20 per share.

(i) If a 10% stock dividend is declared how many new shares would be issued?
(ii) What would be market price after the stock dividend.
(iii) How would the equity account change?
(iv) If a 25% stock dividend is declared what changes will take place?
(v) If company instead declares a 5:1 stock split, how many shares will be
outstanding? What would be the new par value? What would be the new market
price?
(vi) If company declares a 1:4 reverse split, how many shares will be outstanding what
would be new par value? What would be new market price>
(vii) If company declares a dividend of rs. 2 per share and stock goes ex dividend
tomorrow what will be price at which at which it will sell?