Letto and Sons Has a Market Value Equal to Its

question 124

Multiple Choice

Letto and Sons has a market value equal to its book value. Currently, the firm has excess cash of $250 and other assets of $16,800. Equity is worth $9,500. Letto has 300 shares of stock outstanding and net income of $550. What will the stock price per share be if the firm pays out its excess cash as a cash dividend?

• A) $29.67
• B) $30.83
• C) $31.04
• D) $32.11
• E) $32.67

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Definitions:

Secured Creditor

A creditor that has a legal interest, usually called a lien, in a debtor’s property, securing the debt and giving the creditor rights to the property if the debt is not repaid.

Collateral

Assets pledged by a borrower to secure a loan, which can be seized by the lender if the loan is not repaid.

Security Interest

A legal claim or lien on assets which secures the performance of an obligation, usually repayment of a loan.

Present and After-Acquired Equipment

Refers to a security interest in equipment that a borrower currently owns and any equipment they will acquire in the future.