A fiRm Has a Market Value Equal to Its Book

question 223

Multiple Choice

A firm has a market value equal to its book value. Currently, the firm has excess cash of $400 and other assets of $7,600. Equity is worth $8,000. The firm has 200 shares of stock outstanding and
Net income of $900. 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) $.25
• B) $.45
• C) $2.50
• D) $3.80
• E) $4.50