Hi again Ryan
I'm sorry, but you are completely wrong.
In you example, the 3 shareholders are only worth %10m each, not $20m.
Think carefully about this......If you have $10 in the bank (asset), but you owe me $4 (liability), what are you worth.
Equity = Assets - Liabilities (makes sense, doesn't it)
$6 = $10 - $4.
Going back to your example...
Assets = liabilities + equity
60 mill = 30 mill + 30 mill
=> 3 shareholder worth 10 mill each ($30m owners equity divided by 3)
after buy back
50 mill = 30 mill + 20 mill
2 shareholders worth 10 mill each ($20m owners equity divided by 2).
DEBT HAS NOTHING TO DO WITH IT.....you are exchanging cash at bank for shares...debt doesn't change.
Casual Investor is correct I'm afraid.....it is first year financial accounting I'm afraid.
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