A Firm Has a Market Value Equal to Its Book

question 5

Multiple Choice

A firm has a market value equal to its book value,excess cash of $500,other assets of $6,200,and equity of $8,200.The firm has 400 shares of stock outstanding and net income of $680.What will the new earnings per share be if the firm uses its excess cash to complete a stock repurchase?

• A)$1.44
• B)$)94
• C)$)86
• D)$1.81
• E)$1.53

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Definitions:

Annual Precipitation

The total amount of rain, snow, sleet, or hail that falls in a geographic area over a year.

Drought

A prolonged period of abnormally low rainfall, leading to a shortage of water and affecting crops, livestock, and human populations.

Grasslands

Ecosystems characterized by large open areas of grasses, important for grazing animals and maintaining biodiversity.

Overgrazing

Overgrazing occurs when plants are exposed to intensive grazing for extended periods, leading to land degradation, reduced ground cover, and a decrease in soil fertility.