Question

Amber corporation purchases? 50,000 shares of its own? $10 par value common stock for? $50 per share. what will be the effect on? stockholders' equity?

a. decrease? $2,500,000

b. decrease? $500,000

c. increase? $500,000

d. increase? $2,500,000

Answer 1

Amber Corporation is initiating a stock buyback in which they are purchasing common stock at $50 and the nominal/par/face value is $10 and the quantity of shares being purchased is 50,000. Multiply the buyback offer rate by the quantity of stock and you will find the rate if the shareholders equity will fluctuate by. If the buyback price is greaterthan current par value, then after the buyback operation shareholders can expect to a rise in their equity.