A Firm Has a Market Value Equal to Its Book

question 68

Multiple Choice

A firm has a market value equal to its book value.Currently,the firm has excess cash of £800 and other assets of £5,200.Equity is worth £6,000.The firm has 600 shares outstanding and net income of £700.The firm has decided to spend all of its excess cash on a share repurchase program.How many shares will be outstanding after the share repurchase is completed?

• A)480 shares
• B)500 shares
• C)520 shares
• D)540 shares
• E)560 shares

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Definitions:

Rebate

A partial refund given to someone who has paid too much for tax, rent, or a utility.

Mailbox Rule

The mailbox rule is a legal principle that an offer is considered accepted once the acceptance is properly placed in the mail, even if it is lost or delayed.

Effective Upon Dispatch

Effective upon dispatch refers to the principle that certain actions, such as the sending of a notification or document, are considered effective from the moment they are sent, not when they are received.

Reasonable Expectation

refers to what an average person might foresee or predict as a likely outcome under certain circumstances, often used as a standard in legal and ethical considerations.