Pampered Pets Has a Market Value Equal to Its Book

question 213

Multiple Choice

Pampered Pets has a market value equal to its book value. Currently, the firm has excess cash of $4,560 and other assets of $148,000. Equity is worth $91,200. The firm has 1,200 shares of stock
Outstanding and net income of $1,600. Pampered Pets has decided to spend all of its excess cash
On a share repurchase program. How many shares of stock will be outstanding after the stock
Repurchase is completed?

• A) 1,120 shares
• B) 1,124 shares
• C) 1,133 shares
• D) 1,140 shares
• E) 1,151 shares

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Definitions:

Futures Market

A financial exchange where people can trade standardized futures contracts; that is, a contract to buy specific quantities of a commodity or financial instrument at a specified price with delivery set at a specified time in the future.

Stock Index Futures

Futures contracts that obligate the buyer to purchase or the seller to sell a specific stock index at a predetermined future date and price.

Multiplier

A factor that quantifies the impact of a change in one economic variable (like investment or government spending) on the overall economy, especially on national income.

Euros

The official currency of the Eurozone, which is used by 19 of the 27 European Union countries.