A Firm Has a Market Value Equal to Its Book

question 57

Multiple Choice

A firm has a market value equal to its book value. Currently,the firm has excess cash of $600 and other assets of $5,400. Equity is worth $6,000. The firm has 500 shares of stock outstanding and net income of $900. What will the new earnings per share be if the firm uses its excess cash to complete a stock repurchase?

• A) $1.20
• B) $1.50
• C) $1.80
• D) $2.00
• E) $2.40

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Definitions:

Shaded Area

Often used in graphs and charts to represent a particular section, range, or subset of data visually.

Distribution

Describes how the values of a dataset or population are spread or dispersed.

Standard Deviation

A measure of the dispersion or spread of a set of data points relative to its mean, indicating how much the values in the data set vary from the average.

Normally Distributed

Describes a data set whose distribution forms a symmetric, bell-shaped curve around the mean.