AMCAMC 

Corporation currently has an enterprise value​ (EV) of 

$ 390$390 

million and 

$ 115$115 

million in excess cash. The firm has 

1515 

million shares outstanding and no debt. Suppose 

AMCAMC 

uses its excess cash to repurchase shares. After the share​ repurchase, news will come out that will change 

AMCAMC​'s 

enterprise value to either 

$ 590$590 

million or 

$ 190$190 

million. What would 

AMCAMC​'s 

share price be after the repurchase if its enterprise value goes​ up? What would 

AMCAMC​'s 

share price be after the repurchase if its enterprise value​ declines?

Question content area bottom

Part 1

AMCAMC​'s 

share price after the repurchase if its enterprise value goes up is 

​$enter your response here. 

 ​(Round to the nearest​ cent.)

Part 2

AMCAMC​'s 

share price after the repurchase if its enterprise value declines is 

​$enter your response here. 

 ​(Round to the nearest​ cent.)

To determine the share price after the share repurchase, we need to go through the following steps.

### 1. **Initial Calculation**
We are given the following dataTo determine the share price after the share repurchase, we need to go through the following steps.

### 1. **Initial Calculation**
We are given the following 

- **Enterprise Value (EV):** $390 million
- **Excess Cash:** $115 million
- **Shares Outstanding:** 15 million shares
- **No Debt**

Enterprise Value (EV) represents the market value of the firm’s operating assets and excludes excess cash. When the firm uses the excess cash to repurchase shares, the cash is no longer part of the company's value.

So, the **current total firm value** (including cash) is:
\[
\text{Total Firm Value} = \text{EV} + \text{Excess Cash} = 390 + 115 = 505 \text{ million dollars}.
\]

The **current share price** before the repurchase can be calculated as:
\[
\text{Current Share Price} = \frac{\text{Total Firm Value}}{\text{Shares Outstanding}} = \frac{505}{15} \approx 33.67 \text{ dollars per share}.
\]

### 2. **Repurchase of Shares**
The company will use its $115 million of excess cash to repurchase shares. The number of shares repurchased can be found by dividing the total cash available by the current share price:

\[
\text{Shares Repurchased} = \frac{115}{33.67} \approx 3.42 \text{ million shares}.
\]

After the repurchase, the remaining shares outstanding will be:
\[
\text{Remaining Shares} = 15 - 3.42 = 11.58 \text{ million shares}.
\]

### 3. **Share Price After the Enterprise Value Changes**
Now, we need to calculate the share price after the repurchase based on two different enterprise values (EVs):

#### a. **If the enterprise value goes up to $590 million:**

After the share repurchase, the firm no longer holds excess cash, so the total firm value is just the enterprise value:
\[
\text{New Total Firm Value} = 590 \text{ million dollars}.
\]
The new share price will be:
\[
\text{New Share Price} = \frac{590}{11.58} \approx 50.95 \text{ dollars per share}.
\]

#### b. **If the enterprise value declines to $190 million:**

Similarly, the new total firm value is:
\[
\text{New Total Firm Value} = 190 \text{ million dollars}.
\]
The new share price will be:
\[
\text{New Share Price} = \frac{190}{11.58} \approx 16.41 \text{ dollars per share}.
\]

### Final Answers:

- **Part 1:** If the enterprise value increases to $590 million, the new share price will be **$50.95**.
- **Part 2:** If the enterprise value declines to $190 million, the new share price will be **$16.41**.

Would you like more details on any step, or have any questions?

---

Here are 5 related questions to deepen your understanding:
1. How does enterprise value relate to share price in general?
2. Why is excess cash subtracted from the firm's EV in valuation?
3. What factors might cause AMCAMC's enterprise value to change so significantly?
4. How would the calculations change if the firm had debt?
5. What are the risks of a share repurchase in this context?

**Tip:** Always double-check if the EV includes or excludes cash before performing calculations related to share price.

AMCAMC Corporation currently has an enterprise value (EV) of $390 million and $115 million in excess cash. The firm has 15 million shares outstanding and no debt. Suppose AMCAMC uses its excess cash to repurchase shares. After the share repurchase, news will come out that will change AMCAMC's enterprise value to either $590 million or $190 million. What would AMCAMC's share price be after the repurchase if its enterprise value goes up? What would AMCAMC's share price be after the repurchase if its enterprise value declines?

Calculate AMCAMC's share price after a $115 million stock repurchase and enterprise value change. This step-by-step guide covers market valuation concepts, stock repurchase effects, and key formulas to determine the new share price. Perfect for finance students and professionals.

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