A Firm Has a Market Value Equal to Its Book

question 298

Multiple Choice

A firm has a market value equal to its book value. Currently, the firm has excess cash of $300 and other assets of $8,700. Equity is worth $9,000. The firm has 375 shares of stock outstanding and net income of $800. The firm has decided to pay out all of its excess cash as a cash dividend. What will the earnings per share be after the dividend is paid?

• A) $1.09
• B) $2.13
• C) $2.67
• D) $3.03
• E) $3.91

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Definitions:

Natural Rate

The long-term rate of unemployment or economic output under prevailing conditions, considered sustainable without causing inflation.

Unemployment Rate

The percentage of employment-seeking individuals in the labor force who are without jobs.

Unemployment Benefits

Payments made by the government or a designated body to unemployed individuals, intended to provide financial assistance while they seek new employment.

Economic Growth

An increase in the output of goods and services in an economy over a period, often measured by the rise in Gross Domestic Product (GDP).