A Firm Has a Market Value Equal to Its Book

question 71

Multiple Choice

A firm has a market value equal to its book value.Currently,the firm has excess cash of $400 and other assets of $7,600.Equity is worth $8,000.The firm has 300 shares of stock outstanding and net income of $900.The firm has decided to pay out all of its excess cash as a cash dividend.What will the earnings per share be after the dividend is paid?

• A)$.25
• B)$.45
• C)$3.00
• D)$4.80
• E)$5.50

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Definitions:

Accounting

The systematic process of recording, measuring, and communicating financial information to help in decision-making.

Supplies Used

The amount of supplies consumed during a specific period, which may be accounted for as an expense.

Balance Sheet

A ledger entry detailing a business’s resources, debts, and equity ownership at a fixed point in time.

Adjustment

A modification made to an account or financial statement to correct an error or reflect new information.