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:

Net Assets

The difference between total assets and total liabilities, representing the owner's equity in a company.

Residual Interest

The remaining interest in assets after all other claims have been satisfied, often related to securitization transactions.

Expected Exit Value

The anticipated amount to be received from an investment at the point of exit, such as selling an asset or closing a position.

Fair Value

An estimate of the market value of an asset or liability, based on current market prices.