Willys-Overland Motors Inc. produces 4×4 quarter-ton trucks. Selected

Willys-Overland Motors Inc. produces 4×4 quarter-ton trucks. Selected financial information for Willys-Overland is provided in the table below.

The CEO, John Willys, wants to distribute $1B of cash using a stock repurchase. He intends to repurchase 15 million shares at a price of $70. Mr. Willys owns 22.5 million shares (worth $1,395 million before the repurchase). He does not plan to sell any of his shares during the repurchase. What is his wealth after the repurchase?

Willys-Overland Motors Inc.
Selected Financial Information
Stock Price $62
Cash $1,000M
Shares Outstanding 150M
Debt $0

A) $1,375M
B) $1,280M
C) $1,385M
D) $1,390M
E) $1,395M

ANSWER

A