Dixie's Has a Market Value Balance Sheet as Shown Below $\quad$

question 50

Multiple Choice

Dixie's has a market value balance sheet as shown below.The firm currently has 2,200 shares of stock outstanding and net income of $10,500. $\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\text { Market Value Balance Sheet }$
$$\begin{array} { | l | r | l | l | r | } \hline \text { Excess cash } & \$ 14,300 & & \text { Debt } & \$ 84,600 \\\hline \text { Other assets } & \underline { 215,460 } & & \text { Equity } & 145,160 \\\hline \text { Total } & \$ 229,760 & & \text { Total } & \$ 229,760 \\\hline\end{array}$$ The firm has decided to spend $6,500 on new equipment and use the remaining excess cash to pay an extra cash dividend.What will the firm's PE ratio be after this dividend is paid,all else held constant? Ignore taxes.

• A)14.20
• B)16.67
• C)13.08
• D)11.22
• E)14.57

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Definitions:

Bond

A financial instrument representing a loan made by an investor to a borrower, typically corporate or governmental, which includes the terms for interest payments and the return of principal at maturity.

Overspend

The act of spending more money than is available or budgeted.

Hoard

A collection of items, often valuable, that is hidden or stored away by an individual or group.

Paralyzed

The loss of the ability to move (and sometimes to feel anything) in part or most of the body, typically as a result of illness, poison, or injury.